East Asia Econ

Including CGBs, the credit impulse is weak, but not terrible, and there's been a tick-up in bank lending and mortgages since August. However, there's nothing to suggest any real momentum in the credit cycle. At the same time, the deflationary move into time deposits continues.

Export growth in the first ten days of November fell to zero. And while the small number of days make this data set volatile, it comes after weakness in broader data for October, both full-month trade, and the PMI. The weakness in exports is a big deal for the BOK when domestic demand is also soft.

There might be some signs of better sentiment feeding into prices, but they aren't strong. Core sequential CPI inflation did get back to zero in October, but the 3mma remains negative. Despite the jump in PMI input prices last month, PPI also continues to fall.

Today's release from the BOJ of consumption activity through September is so-so, with a further moderation from the pick-up seen in June and July. As such, it isn't suggesting a repeat of the pick-up in household consumption that boosted Q2 GDP.

I thought the drop in the mfg PMIs in October might have been noise. But the November data show it is more than that, remaining weak in both Taiwan and Korea. Korea's exports today fell too. That makes the domestic cycle more important, and in Taiwan, that looks more resilient than Korea.

More evidence today that the export cycle has at least peaked, with a sharp slowdown in shipments in October, and another weak PMI. Equity market performance points to there being worse ahead.

While consumption and the leading indicator have warned of cycle moderation, today's data show GDP growth ticked up QoQ in Q3, led by capex. With TSMC still bullish, Taiwan continues to have one of the strongest cycles, making it unlikely the central bank follows the global trend of rate cuts.

We'll find out more with tomorrow's official PMIs, but while the CKGSB survey for October does show an uptick in overall sentiment, the measure for employment remains very weak. With profits terrible in September, it is clear policy needs to do a lot to turn the cycle around.

Headline consumer confidence ticked down in October, led by pensioners. But the overall survey continues to send a constructive message for the BOJ. That's because consumer confidence remains relatively firm, even as inflation expectations show no sign of receding.

UE ticked down in September as the part rate fell. Employment hardly changed at all. There probably isn't much room for changes on the demand-side, as demographic constraints on supply become more binding. A negative shock will show up as rising UE, but firm demand will materialise as higher wages.

Shifts in consumer confidence mirror almost exactly changes in inflation expectations. Given that, it is no surprise with data today showing inflation expectations ticking up, so consumer confidence edged down. The details show consumers happy with the economy, but less confident about employment.

The flash services PMI dropped sharply in October, and with mfg is now below 50. There was a similar drop in June that then reversed, and while the press release doesn't suggest any new factor, the Reuters nonmfg Tankan, which also fell, suggested some noise from unstable weather and a stronger yen.

In today's October survey, overall sentiment remained around the long-term average, inflation expectations didn't pick up, and property price expectations ticked down. There's no reason here for the BOK to become hawkish, or to accelerate the gradual pace of cuts that is currently its intention.

The export data across the region continue to show an enormous shift in the direction of trade. Exports to China haven't recovered following the post-pandemic slump. Where there is growth, it is all about the US.

Checking in on some of the indicators needed for a cycle turnaround: still not much change in the YC, or much repricing of developer debt. There's been more rate cuts today, but the gap that's opened between activity and nominal rates suggests the key is whether price expectations rise.

TSMC's strong results complicate the idea of a peak in the regional export cycle. But the trend is very visible in the drop in today's 20-day exports for Korea, in both YoY and sequential terms. Exports are now back to the sluggish path suggested by equities.

Ni Hong said yesterday that the property market started to improve in October. Today's September price data suggest that the market bottomed earlier in Q3. However, signs of a floor back in Q1 didn't last. And on an all-economy basis, today's data show the economy still in deflation.

Excavator sales are a good illustration of China's woes. Sales fell more after 2020 than they did following the 2009 boom. It is interesting that they have seem to have now bottomed out, but that still leaves them 70% below the peak. To turn things around, policy has a lot of work to do.

The relationship between TSMC's sales and Taiwan's exports has weakened this year. But with the company remaining bullish into Q4, TSMC remains a big, positive support for Taiwan asset prices and macro into 2025.

Japan's export volumes in the last couple of months have suddenly broken out of the range of the last four years to reach an all-time high. That's probably not what the BOJ was expecting, given its worries about the July move in the JPY and "uncertainty" on the outlook for the US.

China's continued global market share gains negate the idea of decoupling. But foreign firms are relocating from China, a trend exemplified by Taiwan. How to square that circle? Previously, the ROW was dependent on foreign firms in China. Now the dependence is on Chinese domestic companies.

With today's August data, it continues to look like machinery orders are going sideways. That casts doubt on whether the recent upturn in machinery capex in the GDP data can be sustained.

Yesterday's data for August show again that the post-covid stepping up of wage growth in Taiwan is holding. That fits with other signs of stronger inflation, in the form of property prices and core CPI. Rate cuts here still aren't likely.

Household incomes bounced in 1H24, boosted by fiscal policy (welfare benefits and Kishisha's tax cuts), as well as property income and solid wage growth. This is an important change, given the big problem with aggergate demand has been the weakness of consumption.

Much has been made of the US overtaking China as Taiwan's biggest market. One consequence is a surge in the trade surplus with the US to over 10% of GDP. That will likely attract a lot more political attention in the event of a Trump re-election.