Just as the overall sentiment has passed through peak pessimism, so the credit cycle has lifted from the trough. But the credit data in May were mixed, and absent the emergence of a significant source of demand, the upside for credit is likely limited.
Foreign trade growth surprised to the upside in May. But the trend is still down, with export growth likely slowing to zero in the next few months.
Overall inflation moderated in May, and the leads for both PPI and core CPI continue to suggest China isn't likely to see higher inflation in the next few months.
Despite all the headwinds, the outlook for the economy looks quite solid, with RGDP likely to be growing 2-3% YoY in the next few months.
The USD level of exports remained elevated in May, but it is increasingly likely that shipments will be falling in the next 6M.
Inflation is high relative to history, but remains modest compared to much of the rest of the world, and there aren't yet signs of a sharp acceleration from here.
No, it isn't only Hu Xijin who cares about growth. The government does too, albeit these days more because of the debt burden and politics than employment. But policy stimulus is underwhelming, seemingly because of a logjam in thinking: how to get more investment growth, but no more debt.
There's been more policy loosening, but it remains incremental. Upside risks to activity do exist as FCI continues to lift, but it is difficult as yet to get too excited about the outlook.
Profits declined in Q1 as input prices rose. Non-manufacturing margins, however, remain fairly high, and overall capex growth in Q1 was stable at 3% YoY.
The BOK was right to be hawkish at its last meeting. There was a broad-based acceleration in inflation in May to the highest rate since mid-2008.
While exports are still growing YoY, it is feeling more likely that they will soon be contracting. The main risk to that is any policy easing in China which causes the cycle there to accelerate strongly.
The PMI suggests Taiwan is experiencing a usual down cycle in manufacturing. The caveats to this conclusion are that the recent slowdown has been worsened by the covid disruption in China and continuing supply shortages.
Consumer sentiment remains very weak. However, a turn up is starting to take shape, and that could gain real momentum if the April-May moderation in inflation expectations continues, and a further relaxation of covid restrictions encourages a more vigorous recovery in services activity.
The labour market data in April were positive, albeit more in the sense that the labour market is growing rather than necessarily tightening. That's good for aggregate earnings, but means a rise in individual pay might still be some way away.
The May PMIs are backward-looking; clearly the bigger story right now is the easing of covid lockdowns. But today's surveys are still useful, suggesting there are some important headwinds to how fast a recovery there can be from here.
The first end-of-month sentiment survey for May was even weaker than in April. That suggests the economy is still contracting. Against that, it was mildly encouraging that prices also weakened, inventories seem to be low, and financing availability didn't deteriorate too much.
Covid numbers finally show real signs of turning, clearing the way for a cyclical recovery in June. But the policy response doesn't yet feel strong enough to add much to the upside.
Reading the western media, and it seems the strongest market in China right now is for doom and gloom. Which is striking, as the short-term cycle is likely close to a trough, while there are reasons to think the longer-term outlook isn't as bad as the spate of the-end-is-nigh headlines suggests.
Regional leads are deteriorating, and are certainly pointing to a slowdown ahead. But the message from the indicators is somewhat mixed, so for the moment the slowdown looks likely to be modest rather than particularly sharp.
There's probably a bit more upside in CPI from here, but data for Tokyo in May fit with the idea that inflation momentum is starting to ease.
Headline services PPI accelerated sharply in April to 1.6% YoY, then highest since at least the 1990s. But that was mainly due to the surging cost of international freight services. Domestic services inflation is rising, but more modestly.
The BOK was hawkish today. It raised rates; revised up its forecasts for inflation; and added to its statement a new phrase that the “Board sees it as warranted to conduct monetary policy with more emphasis on inflation for some time”.
At the margin, today's business sentiment data likely tilt the BOK to remain more hawkish for a bit longer. Korea isn't facing stagflation. Rather, as has been the case recently, growth is strong and inflation rising inflation. Given that backdrop, there's likely more tightening ahead.
With the credit:GDP ratio remaining very high, the recent slowdown in the growth of household credit won't reduce the BOK's financial stability concerns.
The strength of buying intentions and especially price expectations in this month's consumer confidence survey will keep the BOK hawkish at its Thursday meeting.