Inflation seems bottomed for many Asian countries

While activity data remain weak in Asia, inflation appears to have hit an inflection point. Prints for Korea, Indonesia, and Thailand in June all registered a pickup, with the drought conditions related to a consolidating El Niño in Korea and Thailand, and Ramadan in Indonesia providing a lift to food prices. 

El Niño could continue to pose upside risks to food inflation in the near term, with dry conditions having caused delays to rice planting in the Philippines and Thailand. At the same time, the pickup in oil prices since January is passing through to petrol pump prices, and the dissipating base effect should support a further uptick in the months ahead. 

Despite higher price pressures, China's inflation remains low, helped by subdued food prices. PPI deflation persists, as capacity utilisation remains low and domestic demand a drag. CPI inflation is expected to continue to moderate in China before bottoming in Q3, and forecast the PPI will remain in deeply negative territory on falling investment growth and low energy prices, accroding to Barclays.