East Asia Econ

The collapse in property market activity is showing up in sharply lower prices for building materials: they've now fallen by 50% from the peak. But overall industrial prices haven't fallen in the same way, and continue to point to PPI inflation of around 0%.

Some lessening of confidence in June made sense given the fall in the JPY, but last month's sharp drop in the services PMI still seemed overdone. In July, it rebounded back to a strong level, with the commentary highlighting rising employment and capacity pressures.

Korea's data today completes the PPI picture for the region for June. It shows two things: that the inflation cycle has modestly picked up, and that most of China's PPI deflation reflects this bigger global cycle rather than local factors specific to China.

The recovery in export orders has lost some momentum in the 3M to June. Perhaps there is another leg-up to come, but today's data for Korean exports through the first 20D of July were also more solid than spectacular.

Headline export growth in the first 20D of July picked up, but that was because of an extra working day. Adjusting for that and exports grew 11.4%. That's decent, but not showing signs of acceleration.

Today's settlement data again suggest the currency has been coming under more pressure. That is also the implication of $CNY being at the top of the band, though strangely, none of this pressure is being seen in fx reserve data.

The relationship between TSMC sales and Taiwan's macro data isn't precise, but this week's further upgrading of the company's guidance continues to suggest 2024 will be a very strong year for exports, and thus also the economy.

June data show again that the fall in the exchange rate is boosting Japanese exports, but only via the translation effect into JPY. Export volumes aren't rising, with separate data showing little change in USD prices.

The PBC has been signalling unhappiness with falling rates. But as long as price inflation and money supply growth remain so weak, it is difficult to see why interest rates don't fall further still.

The June data are exaggerated by flows that are likely one-off, but still, Taiwan offers one of the clearest illustrations of how the direction of FDI is shifting away from China and towards the rest of Asia.

In the BOJ's Q2 survey, 65% of respondents saying they felt more positive cited higher incomes, an outcome helped by policy stimulus. But 90% of people saying they felt worse blamed higher prices, with low rates and the weak JPY also the result of policy.

Exports were flat in June. The big change was lower imports, and so a further rise in the trade surplus. Monday's data will likely show net exports once again boosted GDP growth in Q2.

Today's May data confirm recent signs of wages recovering back to the stronger post-covid rate of growth, and so provide a reason for price inflation also to remain higher than before 2020.

The rebound in YoY import prices continued in June. The acceleration was base effect, but still, it suggests the recent rise in goods price inflation won't be reversing yet.

Taiwan's exports were a bit better in June. But they still aren't as strong as TSMC sales suggest they should be.

The BOJ's consumption index has ticked up so far in Q2. That is welcome, but even now, the index is 2% below the pre-covid level. Consumption remains the weak spot in the economy.

Latest data show that even before the BOJ makes its postponed decision about cutting gross new JGB purchases, on a net basis, the flow of new buying is already falling.

Industrial prices in China have hardly changed since September 2023. So there isn't upstream price deflation...but equally, there are no signs of inflation either.

The BOJ's latest estimate of the official output gap turning negative in Q1 is puzzling when the Tankan, also produced by the central bank, shows utilisation not just tight, but tightening further.

The June drop in the Caixin/S&P services PMI closes the gap with the already-weak official version. This might be noise, but there's a risk that the muddle through of the last few months is running out of road.

Like high-frequency local data, global commodity prices indicate PPI deflation in China has largely been a cyclical phenomenon, and will end in the next couple of months.

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.