Data today show Korea employment did tick down in March, but the unemployment rate remaining below 3%, the lowest since the 1990s.
Price trends in China remain range bound, with PPI falling at a 2.5%-3% YoY rate, and CPI fluctuating around 0.7%. Narrow leading indicators for inflation suggest some strengthening from here, but a real change in inflation dynamics needs a change in China's overall macro dynamics.
China should be close to an inflection in PPI, but the turn didn't happen in March. PPI fell 2.8% YoY, a rate of deflation that hasn't changed much since August 2023.
The pick-up in core CPI from late 2023 hasn't persisted, dropping back to +0.7% in March. That is consistent with the post-covid performance, and a step down from the pre-2020 average of nearly 2%.
With headline CPI still above target and the US-Korean yield gap widening, we don't think the BOK is ready to cut yet. However, the weakness of economic activity and the softening of core inflation raise the likelihood of a dissenting vote.
Data for the first 10 days of April don't show an acceleration of the mild export recovery of the last few months. That matters for the BOK when domestic demand is also weak.
The export cycle is recovering, but more in volume than value terms, and in Taiwan and China than Korea. This won't remove worries about weak consumption in Korea and China. But it likely is sufficient to keep Taiwan's economy tight, and the CBC will likely be hiking again if exports rise more.
YoY export growth did accelerate in March to almost 20%, the highest since early 2022. But in level terms, the recovery remains rather sluggish.
If there was supposed to be goods price disinflation in Japan, it didn't last long, and didn't make much difference to the level of either import or producer prices.
Even after a deep and long export recession, services inflation in Taiwan is still running at the highest rate since the late 1990s.
Data today show core CPI inflation accelerated to an annualised 3% in March. No wonder the central bank raised rates last month.
Consumer confidence for March gives reasons to think that stronger consumption will drive continued economic recovery in 2024.
The EW survey in March fell MoM, but remains well above the long-term average, and continues to point to better GDP growth.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
We are getting near a test of our thesis that PPI deflation in China is mainly cyclical, with global commodity prices suggesting a PPI recovery.
As in China, consumption has been the big macro drag in Japan. That should change in 2024, but BOJ data through February show no turnaround yet.
With a weak cycle, policy is being loosened. But given China's obvious industrial strengths, it is still striking how much the CNY has weakened.
Japan's negative output gap has finally closed! But that has taken 14 quarters, and even now, the BOJ calculates the positive output gap is just 0.02%.
At 52.7 in March, the S&P Global services PMI for China is firm, above the post-2012 series average. The write-up feels better still, reporting firms being "enthused".
Quick Take chart. Japan's services PMI shows re-acceleration, with firms reporting a "sustained rise" in jobs and inflationary pressures remaining 'marked'
Quick Take Chart. PBC lending to the financial sector via the PSL facility fell in March. The decline was small, and might be temporary. But at the least, the PBC isn't doubling down.
The details of the Tankan survey reinforce the message of the headlines: the labour market is tightening further, and price pressures are rebounding.
Quick Take Chart. Details of the BOJ's Tankan don't show a lessening of inflation. Rather, price pressures are warming up in non-manufacturing, and re-accelerating in manufacturing.
Lower energy subsidies will push up headline inflation in Japan in the coming months. More interesting is that output prices in the BOJ's Tankan survey point to underlying inflation also heading higher.
Headline inflation ticked up in March, but our measures of underlying inflation have now closed in on 2%. The central bank will be able to give more attention to the weakness of the domestic economy.