The export data for the first 10 days tell the same story as other recent indicators: there is an export recovery, but it is modest, and doesn't look to be gaining further momentum.
The fall in the EW survey isn't surprising given higher inflation. But it shows the BOJ's dilemma: keep policy loose as aggregate demand is weak, or normalise to try to lift the JPY and real incomes.
A refreshed slide pack looking at China today and the experience of Asia in the 1990s, with a focus on deflation and rates, exports and mfg, and household income and consumption.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
Consumption isn't as weak as consumer confidence suggests: recently released full-year 2023 data show the consumption share surpassing – albeit only slightly – pre-covid levels.
Recently released FoF data for 2022 confirms no big change in household savings. But investment fell as spending on housing dropped. It should be no surprise the CA surplus has been widening.
Far from gaining momentum, Taiwan's exports fell in May. That is at odds with some other indicators for the mfg cycle, but as long as exports are soft, the overall cycle will be too.
China has released flow of funds data for 2022. If anything, they show an economy looking even less like one in BS recession, with the corporate finance reaching a record high.
The BOJ might well formally change its bond buying programme next week. However, even before that, net buying of JGBs has already turned negative, as the scale of redemptions rises.
The big export growth markets of recent years – autos, BRICs, ASEAN – have lost some oomph. But cyclically, the modest recovery in exports is continuing, particularly in CNY terms.
The BOJ's monthly estimate shows consumption a bit higher in Q2 compared to Q1. But that doesn't change the big picture: consumption is still 4% below the pre-covid peak.
Services inflation will likely ease, but there's upside risk for inflation overall, because of a potentially big rise in exports when import prices are recovering, and unemployment is low.
The step-change in core inflation in Taiwan during covid has yet to dissipate. And it seems unlikely to do so, if the export cycle accelerates as quickly as some of the leads suggest.
Of course, headline data matter. But not as much in Japan as elsewhere. Official data don't suggest a tightening economy, but in the last 6M, the BOJ has nonetheless become more confident that Japan is heading to sustainable inflation. We'd expect more rate hikes soon.
Wage growth in Japan is solid, and the macro backdrop, such as today's services PMI, indicates is probably accelerating. However, the pick-up isn't showing up in all the data.
As with mfg, S&P's services PMI for China remains much stronger than the official version. This gap is, frankly, confusing, though supports the two-speed/muddle-though view of the cycle.
It still isn't clear that PPI deflation is a structural phenomenon. The test will be in the next few months, and whether PPI rises in line with global commodity prices.
Input price data for late May show a rise, validating the increase seen in the PMI. A lot of that is copper, but it should still mean less PPI deflation when data are released next week.
There are some signs of stickiness in services inflation, but May data show that, overall, CPI continues to move in the right direction for the BOK.
Some of the details of today's CPI release are a little concerning, but overall, inflation is receding, with our measures of trimmed mean now below the BOK's 2% target.
Loosening via Pledged Supplementary Lending was one of the hopes for this year, and is part of the official plan to tackle housing inventories. But net issuance fell in May for the third consecutive month.
The regional mfg cycle is recovering, but gaps between official and S&P PMIs mean it is difficult to gauge strength. However, all surveys do point to a broad-based firming in input price inflation.
The official PMI shows that services strength is persisting. And in May, finally, some of the robust manufacturing growth that's been priced by equities is showing up in the data.
With PMIs in TW and KR improving in May, the gap between the S&P and official mfg PMI is probably export-related. Still, the two PMIs do now give very different messages about the strength of the overall cycle.
The rapid rise in the profit share of 2023 hasn't persisted into 2024. But there also hasn't been a decline, so the wage share remains at the lowest since the 1990s bubble.