East Asia Econ

The gap between the weak official and strong Caixin manufacturing PMI shown again in the June data is puzzling. But the Caixin version does make some sense given the loosening suggested by an FCI.

We've been expecting a transition away from domestic services growth to externally led mfg. Instead, both exports and services are picking up. The non-mfg PMI has rarely been higher than it was in June.

Semiconductor exports are growing strongly, but they only account for one-fifth of total exports. Without other products rising too, there's limited upside for exports overall.

This week's May service export data suggests the net export contribution might be a bit lower in Q2 than Q1. But it will still be positive, and so boost headline GDP growth in a way that didn't happen in 2023.

Export performance is the most obvious driver of Taiwan's outperformance relative to Korea since the pandemic, but the domestic story has been stronger too.

The official Monitoring Indicator that was updated today through May includes equity prices, but also real economy inputs like IP. It paints a picture of a pretty punchy recovery.

Retail sales in May bucked the weakening of consumer confidence in recent months. That said, real retail sales remain lower than in September 2023. Consumption is still weak.

If you want to follow just one indicator in China, this is a good candidate. Li Yang has referred to it as "lying flat". If it doesn't change, it is very unlikely the trajectory of nominal growth will either.

After flat-lining for much of 2022 and 2023, China's exports have now risen anew. After rising 20% during the pandemic, volumes have now increased a further 5%. That lift isn't being seen elsewhere in Asia.

With YoY export prices falling, China is exporting deflation. But most of the region has been too. The data continue to suggest export deflation from China is more cyclical than structural.

There's nothing in the June consumer confidence survey to shift the BOK. Confidence was neither strong nor weak. General price expectations ticked down, but picked up for property.

Employment in May hitting a record high and unemployment edging down to a 23-year low aren't strong reasons to think the tightening cycle is over.

10D prices show YoY PPI is on track to turn positive in June. That might, though, be it: MoM prices have ticked down so far this month, with the YoY rise all about the base effect.

Regulatory changes are causing big swings in deposit data, so caution is needed. But looking at M1 in relation to M2 should cancel some of the noise, so the fall in that ratio is concerning.

In today's Q2 BSI survey, overall sentiment didn't change much. But firms continued to report record levels of worker insufficiency, and capex intentions remained strong.

The export data for the first 10 days tell the same story as other recent indicators: there is an export recovery, but it is modest, and doesn't look to be gaining further momentum.

The fall in the EW survey isn't surprising given higher inflation. But it shows the BOJ's dilemma: keep policy loose as aggregate demand is weak, or normalise to try to lift the JPY and real incomes.

Consumption isn't as weak as consumer confidence suggests: recently released full-year 2023 data show the consumption share surpassing – albeit only slightly – pre-covid levels.

Recently released FoF data for 2022 confirms no big change in household savings. But investment fell as spending on housing dropped. It should be no surprise the CA surplus has been widening.

China has released flow of funds data for 2022. If anything, they show an economy looking even less like one in BS recession, with the corporate finance reaching a record high.

The BOJ might well formally change its bond buying programme next week. However, even before that, net buying of JGBs has already turned negative, as the scale of redemptions rises.

The BOJ's monthly estimate shows consumption a bit higher in Q2 compared to Q1. But that doesn't change the big picture: consumption is still 4% below the pre-covid peak.

The step-change in core inflation in Taiwan during covid has yet to dissipate. And it seems unlikely to do so, if the export cycle accelerates as quickly as some of the leads suggest.

As with mfg, S&P's services PMI for China remains much stronger than the official version. This gap is, frankly, confusing, though supports the two-speed/muddle-though view of the cycle.

It still isn't clear that PPI deflation is a structural phenomenon. The test will be in the next few months, and whether PPI rises in line with global commodity prices.