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.
CPI deflation is stabilising, though because of food prices rather than domestic demand. The surprise in April was the lack of any lessening of PPI deflation, despite some improvement in leading indicators.
Core CPI inflation continues to run at a bit below 1% annualised. That is too low for comfort, though for now doesn't show any sign of taking a new step down into deflation.
Cyclically, wage growth has slowed from over 2.5% YoY in 23 to 1.4% now. But the structural rise in manufacturing wage growth is persisting, which will have macro significance if the sector convincingly lifts out of recession.
The big change in household behaviour isn't from spending into saving – in both respects, pre-covid trends have been regained. Rather, the shift is savings into bank deposits and out of financial and property investments. That matters for inflation, and for policy.
There was quite a big fall in the EW survey in April, a warning that recent JPY volatility might be pushing up inflation expectations again.
While a bit stronger than the beginning of this year, the household survey shows real consumption spending still 2% lower than in 2019.
Another chart that challenges the idea that the structure of China's economy has changed much. Relative to GDP, construction is rebounding, while manufacturing is falling.
It feels to us that, with so much of the market's focus being on $JPY and the MOF, not enough attention has been paid to the increasing confidence being expressed by the BOJ.
PMIs, CPI, wages, profits....most macro indicators look positive. The one weak spot remains consumption, with little sign of improvement through March.
Underlying trade values show the moderate export recovery that began in mid-23 is continuing, while imports are flat-lining.
Part-time wage growth is now finally reflecting the labour market tightness seen in survey data, and so supports the BOJ's confidence in the macro cycle.
The nominal export recovery across the region has lost momentum, with Taiwan's April exports fading YoY and MoM.