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.
Trimmed mean CPI rose again in April to a record high, and there's probably still a bit more upside ahead. But for CPI to take another meaningful step higher, the domestic labour market likely needs to tighten further.
Export growth looks to have moderated in the first 20 days of May. The surprise was that there wasn't more of a material weakening.
The Covid-19 situation has improved, but not by enough to declare the all-clear. Policy has eased, but not by enough to ensure recovery when lockdowns do end. There's more debate about giving help to households, but further loosening still seems likely to focus on companies and investment.
The 5-year Loan Prime Rate was cut 15pb today. That was bigger than market expectations, but property equities rose only modestly. That is likely a reflection of how weak activity currently is, and thus how much work still needs to be done to turn things around.
It has been clear for a while that the Asian export cycle has peaked and is moderating. The sharp fall in Taiwan export orders in April is the first sign that the slowdown is not becoming much sharper.
CPI rose in April, with the BOJ's preferred measure rising above 2% YoY for the first time in Governor Kuroda's tenure at the BOJ. The leads now suggest a peaking, which if right, would likely be positive for domestic economic momentum.
Headline YoY export data in April were reasonably firm. But exports fell quite sharply MoM. Downside risk for the regional export cycle is increasing.
Japan's machine orders bounced in March, but not by enough to change the overall picture. That continues to look like a continuation of the sluggish recovery in domestic capex of recent months, and export growth slowing to zero.