Korea's data today completes the PPI picture for the region for June. It shows two things: that the inflation cycle has modestly picked up, and that most of China's PPI deflation reflects this bigger global cycle rather than local factors specific to China.
The recovery in export orders has lost some momentum in the 3M to June. Perhaps there is another leg-up to come, but today's data for Korean exports through the first 20D of July were also more solid than spectacular.
Headline export growth in the first 20D of July picked up, but that was because of an extra working day. Adjusting for that and exports grew 11.4%. That's decent, but not showing signs of acceleration.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
Today's settlement data again suggest the currency has been coming under more pressure. That is also the implication of $CNY being at the top of the band, though strangely, none of this pressure is being seen in fx reserve data.
The relationship between TSMC sales and Taiwan's macro data isn't precise, but this week's further upgrading of the company's guidance continues to suggest 2024 will be a very strong year for exports, and thus also the economy.
Inflation was largely unchanged in July. Services inflation was a bit higher, but for the BOJ these data are probably less important than the results of the strong Tankan earlier in the month.
June data show again that the fall in the exchange rate is boosting Japanese exports, but only via the translation effect into JPY. Export volumes aren't rising, with separate data showing little change in USD prices.
This is our monthly slide pack for China, that goes through the argument we laid out last week: how the Plenum and the US election together likely end the macro muddle through of the last 18 months.
The PBC has been signalling unhappiness with falling rates. But as long as price inflation and money supply growth remain so weak, it is difficult to see why interest rates don't fall further still.
The June data are exaggerated by flows that are likely one-off, but still, Taiwan offers one of the clearest illustrations of how the direction of FDI is shifting away from China and towards the rest of Asia.
Today's GDP release shows property activity is still collapsing and economy-wide pricing is weak. The PBC will struggle to hold up rates – and thereby the currency – if this week's Plenum doesn't provide a real boost to sentiment.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
Even allowing for a change in credit intensity, June headline credit and money data are bearish. The one positive trend is data through May showing household demand deposits no longer falling so quickly. That shift continuing would help sustain China's macro muddle through.
In the BOJ's Q2 survey, 65% of respondents saying they felt more positive cited higher incomes, an outcome helped by policy stimulus. But 90% of people saying they felt worse blamed higher prices, with low rates and the weak JPY also the result of policy.
Exports were flat in June. The big change was lower imports, and so a further rise in the trade surplus. Monday's data will likely show net exports once again boosted GDP growth in Q2.
We don't have conviction about what the Plenum will deliver, but we are confident that with next week's meeting, and then the US election, the macro and market muddle through of the last 18M is likely ending.
In staying on hold today, the BOK put slightly more emphasis on the KRW and household debt. The bank is moving towards a cut, but that decision now seems a bit more tied to the Fed and rate differentials.
After faltering in 2023, wage growth is now back on the stronger trend that began in 2021. The recovery in the manufacturing cycle gives us confidence that this can at least be sustained, but we'd still like to see a clearer lift in exports.
Today's May data confirm recent signs of wages recovering back to the stronger post-covid rate of growth, and so provide a reason for price inflation also to remain higher than before 2020.
With the labour market another sign of economic weakness, rate cuts are getting closer, but the pick-up in exports continues to give the BOK time to confirm that inflation does indeed drop to target.
The rebound in YoY import prices continued in June. The acceleration was base effect, but still, it suggests the recent rise in goods price inflation won't be reversing yet.
PPI deflation has been more cyclical than structural, and the strengthening in Q2 should continue into Q3. But core CPI remains very weak. Inflation is too low to support rates.
Taiwan's exports were a bit better in June. But they still aren't as strong as TSMC sales suggest they should be.
The one-off firm survey undertaken as part of its long-term policy review has allowed the BOJ to reiterate its positive stance, and provide more of the evidence underpinning it.