The key data this week with our next guest, chief asia economist at ihs global insight.
Good to see you.
Thank you for joining us.
Of all the economic data being released this week, which one is most important to you?
It is a big week for u.s. data.
We have got the decision, and you have also got the first estimate of the q2 gdp, and the payrolls.
We are seeing good momentum in the u.s.. we expect the fed will continue its tapering, as we have seen in the recent past.
The economic data has been fine, so no reason to expect them to change their gradual tapering and withdraw about $10 million of stimulus from the qe program.
In terms of q2 gdp, the first estimate, we are expecting a stronger momentum than the market.
We are expecting the reading to be about 3.6% annualized growth, which is pretty strong growth.
That is payback for the first quarter, which was heavily affect it by bad weather in the u.s. it is just a rebound, in terms of the weather factor.
The payrolls, go ahead.
Still 235,000. so good momentum continuing.
Because we are looking for the momentum in the u.s. economy to remain reasonably good in the second half of this year, and going into 2015 we are expecting growth to strengthen.
A lot of positives still playing out in the u.s. economy.
I guess nobody expects them to waver from that tapering schedule.
But what about accelerating the rate increases?
Could we see forward guidance if economic data in the u.s. is so robust that perhaps they could quicken up to speed of raising those rates in the u.s.? when we see what janet yellen has been saying, she is still very cautious about the pace of any rate hike.
So we are still looking for the first rate hike in the u.s. to be around about the third quarter of next year.
So still about a year to go before we see the first rate hike.
I think they really want to see the economy showing good momentum.
Up to now, it has been a bit mixed fixture, particularly because of the weather factor in the first quarter.
I think there is a lot of caution still at the fed.
And they want to end their tapering program first, which will probably be around the end of this year, leaning into the rate hike somewhere in the middle of next year.
Let us talk japan right now.
Industrial production on wednesday, and everybody keeping a nine on -- an eye on abenomics, especially after cpi figures.
What are you seeing in the japan story?
An interesting note saying it is pivoting away from china.
Talk about this a little more.
Clearly, we are seeing the sales tax hike has started to have an impact in terms of industrial production, although we do expect the jew number probably will still show somewhat of a negative dip.
Overall, when we look at japanese industry, it is still a story of hollowing out.
The domestic market is facing a lot of headwinds.
First of all, in the population of japan, it is declining, year by year.
And japan is also facing other issues in terms of competitiveness challenges from cheaper uses elsewhere.
One of the big hits they have faced is the problems in china, where a lot of their investment has been in the last 30 years, with the anti-japanese riots in 2012. japanese corporate board rooms have been looking to shift their production elsewhere.
They are moving away from china in terms of their new investment decisions.
The most attractive location is turning out to be the region of southeast asia where there is a lot of momentum in terms of their regional economy.
It is a region of 635 million people.
It is growing at about 6% per year.
There is a lot of regulatory reform in some of the companies like the philippines, which is starting to grow at a pretty dynamic base.
You are seeing opening up.
In myanmar -- we are seeing myanmar open up.
In vietnam is seeing an economic recovery in the last two years.
I want to ask you about china.
Industrial profits did rise 17.9%, up from 8.9% in may.
Official pmi data coming out this friday.
Doesn't this suggest maybe china is still in play?
I think that is right.
I think what we have seen is that the first quarter was sluggish, but the second quarter showed a lot of stabilization.
Now, with the pmi for manufacturing, we saw the hsbc flash estimate rebounding nicely into positive territory for the second month.
It does look like momentum is being boosted in china, because of the many stimulus and other measures, including some easing of monetary policy.
All of this suggests momentum could be improving into the second half of the year.
Taking some of the risk away in the near term for the chinese economic outlooks.
I still have concerns about the medium term outlook, because there are a lot of imbalances around shadow banking, and the property market, which is still showing negative increases in property prices.
Near-term, i think the momentum is getting better.
When we look out over the next
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