Employment rose to another all-time high in April, keeping unemployment below 3%. This labour market tightness is striking when the mfg PMI has been below 50 for most of the last 2 years.
You might think that with property activity collapsing and a mfg boom, China would import fewer commodities and more capital goods. But what's actually happened is almost exactly the opposite.
Data today continue the theme of export sluggishness v domestic strength. Exports underwhelmed in April, but the post-covid pick-up in domestic machine orders continued through March.
This week's consumer and business surveys show recovering exports, weak domestic sentiment, but firm headline inflation. The BOK is unlikely to shift policy.
Chaebol dominance isn't new. But at least cyclically, what's good for large firms usually lifts the small too. But that hasn't been true in 2024, and the gap complicates the BOK's task.
Household borrowing is consistent with the BOK's on-off contention of a soft landing. It is now rebounding, but much less quickly than it was growing before 2020.
Export performance has been stronger in May. Workday-adjusted growth in the first 20 days was almost 20% YoY, a recovery that continues to rely solely on semiconductors.
Consumer confidence fell in May, which would reinforce BOK concern about domestic demand. But the bank seems stuck for now because inflation expectations also rebounded.
Export orders rose in April, but continue to trail actual exports. One reason could be supply-chain restructuring, shown by the fall in the overseas production ratio.
This year's expected manufacturing pick-up has been patchy, but perhaps that is changing, with much stronger listed company sales in April, led by tech.
Friday's funding for buying inventories looks small. But with falling price expectations leading to a buyers' strike, it is a step in the right direction. This buyers' strike has cut construction. By keeping savings in the banks, it has lifted the S-I and CA surplus, and lowered velocity and CPI.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
Property remains in a deep funk, and while the government talks confidently about a successful transition to new growth engines, all the policy action indicates increasing concern that real estate remains so weak.
IP growth remains the bright spot in China's economy, with the pick-up in April being broad-based across industries.
Today's property price data for April weakened again. With PPI and CPI remaining weak too, the bounce in equity prices hasn't been enough to change the all-economy rate of deflation.
Headline developments in the labour market are consistent with the BOK's outlook for a moderation in tightness. However, the big structural changes – such as the rise in female part rate – mean these headline developments don't tell the whole story.
GDP contracted again in Q1. The big driver remains the weakness of consumption, dragged down by the weak JPY and inflation eating into real incomes. Partly as a result, it seems to us that the BOJ is signalling it will raise rates more than the market currently thinks.
A chart pack laying out our views on China. We argue that deflation is more cyclical than structural; consumption and services have recovered; and that property inventory policy would mean real upside risk.
The April PPI data were soft, but the government's higher-frequency series for industrial prices, updated today for the first 10 days of May, continues to suggest a lessening of deflation.
External goods price disinflation is now over, with import prices now rising again across the region. That is likely to feed into stronger PPI, even in China.
In contrast to the common impression, China's global market share has been falling. Whether this is just a pause after the covid surge or something more permanent will be a big theme in 2024 for China's cycle, the CNY and China's trade relations with ROW.
On a headline basis, export growth accelerated again in the first ten days of May. That keeps alive the theme of industrial recovery, even if some of the details continue to look more sluggish.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
The fall in credit in April, while unprecedented, can be argued away as reflecting a temporary shortfall in official bond issuance. It is more difficult to dismiss the equally unprecedented drop in M1 in the same way.
Data in yesterday's Q1 monetary policy report showed another sharp fall in mortgage rates to well below 4%. But while they worked before, rate cuts in this cycle have shown no sign yet of boosting buyer sentiment.