China Yuan Reminbi devaluation may hit exports

CNY devaluation could slow exports to China, while weighing on upstream inflation depending on the pricing behavior of Chinese exporters. 

Domestic machinery orders excluding ships and electric power (core orders), a leading capex indicator, increased for a fourth consecutive quarter in Q2. They were also projected to increase marginally in Q3 based on a survey of major machinery makers conducted by the Cabinet Office in late June. 

While this forecast may be somewhat on the high side due to the method of calculation, which multiplies the actual projections of those machinery makers by the "actual/projected" ratio for the previous three quarters (including the stronger-than-expected result in Q2).

"We believe any decline in actual orders for that period is unlikely to alter the longer-term uptrend. GDP-based capex is likely to continue growing at an average pace of about 1% q/q through 2016", says Barclays.