The acceleration in inflation of the last few months stalled in May, with both core and headline unchanged. The leading indicators aren't yet suggesting a re-acceleration, with a softening of commodity prices offsetting the weakness of the JPY.
As with other inflation indicators, May service PPI shows price pressures running at multiyear highs. But the pick-up of the last couple of months is narrow, concentrated in international transport costs, which in turn related to the rise in energy prices.
The fall in exports in June might reverse in the next couple of months as China reopens after the covid lockdowns. But even if that occurs, it would likely be a temporary boost, with leading indicators for the next 6M all pointing down.
The BOJ is under pressure, but Japan isn't in crisis. Rising energy prices hurt, but ending YCC would be painful too. Instead, it is probably better to focus on economic normalisation post-covid. That would likely include an influx of tourists concluding that, with the JPY at 135, Japan is cheap.
Orders data continue to suggest that Taiwan's headline export growth slows towards zero in the next 3-6 months. That probably represents a best case outcome for export data for the rest of the region.
Covid numbers have fallen, which is good news for the cycle, given the government continues to make clear that zero covid is a pre-condition for everything else. Economic activity is recovering, but so far, the lift seems modest.
The BSI survey suggests that the economy remains on a recovery path. There aren't signs of a big acceleration in growth, but nor are there indications that the headwinds in the world economy and depreciation of the JPY are causing Japanese firms to turn pessimistic.
The BOJ didn't move today, and while the central bank is facing strong market pressure to move, so far at least, there's not so much domestic political pressure.
Exports in volume terms remain elevated compared with history. But JPY weakness means a lot of variation in export values, and also a rapid rise in the import bill.
Given everything else we already knew about May, it wasn't surprising that property prices were also weak last month. However, there needs to be a turnaround soon to think the correction is just cyclical rather than structural.
The labour market release for May was strong, and will keep the BOK hawkish.
Machine orders in April were surprisingly strong, and suggest some resilience in both exports and domestic capex.
The May activity data release didn't surprise. Most of the data were better than April, but not all. GDP may have grown YoY in May, but only just. Overall, the economy is recovering, but is still weak.
China remains on course for modest recovery. Covid-19 remains a downside risk, while the upside is muted without clearer policy support.
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.
