Retail sales have been anchored around zero for more than a year, property activity is still dropping and FAI is contracting. Nonetheless, IP is growing around 5%, partly because of exports, and the government's attitude suggests that it continues to think that is enough.

China macro isn't weak enough to trigger a change in policy direction. The JPY is weak enough to speed up BOJ tightening and puts pressure on Takaichi to change fiscal rhetoric. KRW is starting to look more interesting than rates, while in Taiwan, domestic demand puts the focus on rates.

Headline growth rates are slowing, but the government's qualitative assessment remains bullish, there are more signs of life in domestic demand and services, and while a 2026 inflation forecast of a bit over 2% isn't so high, it has been raised four quarters in a row, and is above the policy rate.

The big macro dynamic is the sharp rise in chip prices that is boosting the terms of trade, and thereby lifting nominal GDP and national income. Today's July export and import price data show that these trends remain in place. Rates have priced at least the first stage of this. The KRW still hasn't.

China's economic data are widely cited – but aren't well understood. To try to tackle that, I have been making some data guides. This first one tackles consumption.

A longer note on fiscal policy: the rhetoric of loosening versus reality of tightening of Abenomics and the early part of Takaichi's administration, the costs of that for the household sector versus the benefits for corporates, and what all that means for Takaichi's stance going forward.

Annualised regular wage growth in both manufacturing and services has been above 3% since 2024. In Q2 in manufacturing, it has been near 4%. The risk remains that the export cycle now slows, but TSMC's strong sales and elevated manufacturing overtime don't suggest that is happening yet.

Today's summary of opinions of the July meeting had two themes: first, AI-related demand, and second upside risks to inflation – and the need for monetary policy to control them. The data flow showed a modest slowdown in bank lending, a somewhat sluggish EW survey, and a fall in the CA surplus.

China macro is again a contrast between export strength and renewed deflationary pressure. Takaichi's sales tax cut doesn't look like the policy approach Bessent wants. For Korea, data an BOK analysis points to upside risks. In Taiwan, the key issue is lagged spillover from the 24-25 export boom.

Inflationary pressure turned down again in July. That wasn't a surprise, given the decline in global energy prices. The sharp MoM drop in CPI was, however, still notable, being comparable only to the global financial crisis and the initial covid outbreak.

The BOK this week published a nice report on spillovers from the terms of trade boom. It wouldn't be fair to say that this pays only lip service to the usual concerns on why spillovers might be limited. But the report's central expectation is that the impact will be "both sizable and persistent"

Both headline and core CPI inflation ticked down in July as energy prices eased. However, underlying inflation feels firm, with sequential core failing to break below 2%; import price, PPI inflation and CPI computer price inflation rising to decade highs; and services inflation running at 2.6%.