Consumers aren't sure that inflation is easing, with price expectations remaining strong in June. But with consumer confidence down and other data today showing the monitoring index falling, the CBC won't be thinking inflation is about to bounce back.

Data today show Taiwan's NIIP surplus dropped a little in 2023, but remained extremely large. Those assets have been accumulated via strong exports, 60% of which are now "high-technology". And yet, the TWD through April weakened, with one measure of the REER no higher than 2001.

Relative to history, Taiwan's wage growth remains strong. As would be expected, that's being led by manufacturing, though services wages have been firm too. For now, the downside for rates remains a structural appreciation of the TWD, not a problem with the cycle.

PPI inflation eased in May, falling to 3.2% YoY, down from the recent peak earlier this year of more than 4%. The ongoing decline in JPY-denominated commodity prices shows this process has further to go, but feed-through into PPI will likely be dampened as importers try to restore profit margins.

May was a bit softer for TSMC, but sales are still 26% higher than at the beginning of the year. That matters a lot for the overall economy, given that semiconductors are about 50% of exports, and outside of semi, exports aren't growing much, if at all.

The sharp reversal in exports expected by the government isn't showing up yet. Shipments rose strongly again in May, and are now 17% higher than in December. With imports weaker last month, the trade surplus increased to near 20% of GDP, a new multi-decade high. The biggest driver remains the US.

Sentiment in the Economy Watchers survey still points to slower GDP growth in 2H25. However, it now isn't particularly weak, improving in May back to the long-term average of the survey. That's probably not enough for the BOJ, but likely would be if Japan can now land a trade deal with the US.

In the second release of Q1 GDP, consumption was revised higher. In aggregate terms, there's still no convincing trend up, but the per capita level of spending is now as high as the previous record peak in 2014. The revision boosted GDP to flat QoQ, even though capex was revised down.

Consumer sentiment has been sliding, but in April, the BOJ's measure of consumption was firm. It is still well below the pre-covid level, but the numbers look consistent with the BOJ's view that consumption is on a "moderate increasing trend".

The S&P PMIs indicate slower growth in May, with the mfg PMI dropping sharply, and today's services PMI sluggish. Both also suggest more deflation. In today's survey, input prices ticked up, but selling prices were pushed down by "greater competition for new work and promotional activities".

High-frequency data continue to point to a faster rate of deflation in China in recent weeks. One reason is lower energy prices, which should bring some economic relief to downstream firms, but building materials and steel prices are also falling. Cyclical momentum the economy remains very weak.