East Asia Econ
Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
China – PMIs lifted by prices
The PMIs improved in September. That was led by a further strengthening of pricing, with input prices in the PMI reaching almost 60, the highest level since April 2022. We'd guess this reflects a nominal tailwind from the modest weakening of the USD over the last 12M.
China – living without the US
China's market share in the US has fallen sharply, but its market share globally has risen. This disconnect represents some temporary factors, but is also the result of change in China's industrial sector, a factor that differentiates China from 1990s Japan.
Korea – still no export rebound
Equity markets have been pricing in a decent improvement in exports, but the September business survey didn't show any recovery in export sentiment. However, both the business and sentiment surveys suggest stickiness in inflation.
Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
Taiwan – CBC on hold
The CBC kept policy rates unchanged yesterday, seeming confident that inflation will fall below 2% next year. That might be right, but the bank's forecast that export growth will rebound to 10% YoY in Q423 isn't the most obvious environment for a fading of inflation to occur.
Japan – services slowing
The BOJ today left policy unchanged, and inflation in August also didn't move much. The first cut of part-time wages for August was sluggish. That's important when the flash PMI for September suggests the services recovery is now fading.
Region – still no upturn in exports
There's still no sign of a rebound in the export cycle. With headline inflation picking up and labour markets tight in the region ex-China, further rate hikes are still possible. But tightening would be even more likely if exports were rebounding, as some of the leads have suggested is likely.
Taiwan – the relevance of this week's CBC meeting
With exports still weak, our CBC model suggests very little probability of a hike this week. But that model doesn't capture the rise in inflation, which until 2020 was so low that it didn't seem to matter. At the least, the CBC should sound more hawkish, and that has relevance for Korea and Japan.
Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
China – stability, but not in property
The activity data for August were a bit better. That's consistent with the stabilisation of prices that, we think, is the most important economic development recently. We doubt that a real upcycle is beginning, but the economy can start to look better relative to beaten-up expectations.
Japan – renewed labour market tightening?
Today's BSI survey suggests growth momentum remains strong. It is also indicating the labour market is about to tighten quite a lot more. For us (though less so for the BOJ) that has been the missing ingredient in Japan's recovery, and so it would be important if that is now changing.