Asia-Pacific inflation: Energy shock renews Asia-Pacific inflation pressure, with core pass-through still limited

Overview

This regional inflation monitor assesses how the renewed energy-price shock is affecting inflation across Asia-Pacific economies. Goldman Sachs finds that the shock has lifted near-term price pressure broadly, but that second-round effects on core inflation and wages remain comparatively contained so far.

Core views

Goldman Sachs attributes renewed regional inflation pressure to a fresh rise in energy prices over recent weeks. Its commodities strategists raised their December Brent forecast to $85/bbl. Although oil did not fully return to its March peak, refined-product prices remain elevated and LNG and diesel prices have set new highs for the year. The report links these moves to the Iran war, the closure of the Strait of Hormuz and the resulting reduction in energy supply to Asia, with LNG flows to some destinations remaining subdued. The immediate transmission is expected to be most visible in September import prices and producer prices across many economies. The effect on final consumer prices should be smaller in economies where fiscal subsidies or regulated retail prices cushion households. Before the conflict, CPI inflation was broadly in line with or below central-bank targets in most regional economies; after the shock, headline and core CPI are generally at or above targets. The report characterizes regional inflation as stabilized at a moderately elevated level for now, while also flagging renewed inflationary pressure over the past month. The report distinguishes the energy shock from broader domestic inflation persistence. Pass-through to core CPI has so far been limited: median regional core inflation has edged up only slightly. Wage inflation differs materially across economies, but has been broadly stable in developed markets and is only ticking higher in some emerging markets. This suggests that the current rise is primarily an energy-led impulse rather than a broad-based acceleration in underlying inflation. Goldman Sachs notes that both its own and consensus 2026 CPI forecasts moved higher soon after the conflict and supply disruption. Its 2026 views are now broadly similar to consensus across the region, but its 2027 forecasts diverge by economy. The institution is most above consensus for India and Malaysia, while it is furthest below consensus for Japan, Vietnam and the Philippines. The report’s regional comparisons use GDP-weighted inflation averages, calendar-year forecasts, economy-specific core CPI definitions and policy-target ranges whose upper bound is treated as the relevant target benchmark. The country monitoring framework covers Mainland China, South Korea, Taiwan, India, Indonesia, Malaysia, the Philippines, Thailand, Vietnam, Japan, Hong Kong, Singapore, Australia and New Zealand. For each, the report tracks headline CPI, CPI momentum, CPI-category contributions, producer and import prices where available, wage growth and retail energy prices. It also notes data-frequency differences: New Zealand headline and core CPI and Australia core CPI are released quarterly, while the latest Australia CPI reading is for July and New Zealand’s latest data are for the second quarter.

Analysis framework

Goldman Sachs tracks the energy-supply shock through oil, LNG and refined-product prices, then evaluates its transmission into import prices, producer prices, headline CPI and core CPI. It compares country-level inflation momentum, category contributions, wages and retail energy pricing against policy targets and consensus forecasts, using GDP-weighted regional measures for regional comparisons.

Methodology notes

• Industry AnalysisSupply-demand framework

  Energy supply disruption and price pass-through analysis

  The report links reduced energy supply to Asia following the Strait of Hormuz closure with higher oil, LNG and refined-product prices, then traces likely effects through import, producer and consumer prices.

• Other

  GDP-weighted regional inflation comparison with economy-specific core CPI measures

  Regional inflation is calculated as a GDP-weighted average, while core CPI uses each economy’s own official-style exclusion rules to compare underlying price pressure.

Key data

• Goldman Sachs December Brent forecast$85/bblRaised following renewed energy-price pressure.
• Asia ex-Japan CPI forecast, 20261.8%Goldman Sachs and consensus forecasts are both 1.8% year-on-year.
• India CPI forecast, 20275.2%Goldman Sachs forecast versus 4.8% consensus; the report identifies India as its largest above-consensus divergence.
• Malaysia CPI forecast, 20272.4%Goldman Sachs forecast versus 2.0% consensus.
• Japan CPI forecast, 20271.4%Goldman Sachs forecast versus 2.1% consensus.
• Philippines CPI forecast, 20273.3%Goldman Sachs forecast versus 4.0% consensus.
• Vietnam CPI forecast, 20273.4%Goldman Sachs forecast versus 3.9% consensus.

Impact & implications

The report indicates that the energy shock is raising near-term inflation pressure across the region, particularly through import and producer prices. The consumer-price effect should differ by local subsidy and regulated-price regimes, while the limited rise in regional core inflation and broadly stable wage growth point to restrained second-round effects so far.

What to watch

• Further movements in oil, LNG and diesel prices, including the uncertain oil-price outlook.
• September import-price and producer-price releases across regional economies.
• Whether energy costs pass through more materially into final consumer prices despite subsidies and regulated prices.
• Core CPI and wage growth for signs of broader second-round inflation effects.
• Divergence between Goldman Sachs and consensus 2027 inflation forecasts, especially in India, Malaysia, Japan, Vietnam and the Philippines.