Paul Cavey

China – PPI and liquidity preference

Japan - recent data

Q2 GDP shows economic recovery remains slow and uneven, with downside risks in early Q3. Capex is rising, but really only in nominal terms. Exports are going sideways, though there might be some upside risk from autos. Relatively high inflation will likely peak soon. The monetary base is shrinking.

China – taking stock

The cycle is weak, and yet the market was surprised the PBC cut rates yesterday. Central bank rhetoric had been suggesting rates had bottomed. But low inflation and signs of rising real rates make it more likely that rates fall rather than rise.

China - July activity data

China - July credit data

Headline credit growth weakened in July, and even though M1 growth strengthened, the data don't suggest "stimulus" that can turn around the current trajectory of the economy.

Korea - July labour market

China - July inflation

China – taking stock

China's cycle remains weak. Perhaps money data and excavator sales for July will reinforce the message of the construction PMI that stimulus is feeding through. Otherwise, the risk remains of a growth accident that, via a weaker CNY, gets transmitted to the rest of the world.

Taiwan – July foreign trade

Japan - July Economy Watchers survey

China - July foreign trade

Exports remain resilient, but the leading indicators continue to point down, with imports of components slowing again in July. It is likely exports are contracting before the end of the year.

Korea – July foreign trade

Korean July trade data were consistent with three themes for the regional export cycle: momentum is slowing; so far, it is a slowdown, not a recession; but leading indicators point to exports starting to contract before year-end.

Taiwan – July CPI

Japan – June wages

The China Diviner

Chinese exports have boomed since 2019. That boom isn't (yet) turning to bust, but it is likely ending. That's a big issue when the rest of the economy is so weak. Even without a new covid outbreak, there's a rising risk of a real growth accident in 2H22.

Korea – July CPI

Korean inflation is probably close to peaking as the rise in goods prices starts to decelerate. But services price inflation remains firm, and while that continues, there isn't much room for the central bank to be able to relax.

Taiwan – July PMI

China – taking stock

The latest fall in Covid-19 cases could lift activity in August. But with property still very weak, inflation momentum softening and exports slowing, it feels that any upturn in growth would be short-lived.

China - July PMI

The headline PMI was weak in July, and the details were soft too. There's no sign of the cycle finding a durable floor.

Japan – July consumer confidence

The negative correlation between inflation expectations and consumer confidence continues to hold. So, with inflation expectations rising, consumer confidence is falling quickly.

Japan – June/July inflation

Japan - June labour market

Korea – August business sentiment

Business sentiment and price indicators remain at high levels. That justifies more BOK tightening in the short term. But there are some signs of change ahead, with exporter sentiment clearly down from the peaks, and inflation leads also falling.

Korea – July consumer confidence

While consumer confidence fell in July., the bigger story is the very sharp rise in inflation expectations.

China – taking stock

China's export market share gains show local firms remaining competitive, and that should make some individual equities interesting. But macro trends don't look strong enough to lift rates. Indeed, price indicators look more deflationary than inflationary.