East Asia Econ

Chaebol dominance isn't new. But at least cyclically, what's good for large firms usually lifts the small too. But that hasn't been true in 2024, and the gap complicates the BOK's task.

Household borrowing is consistent with the BOK's on-off contention of a soft landing. It is now rebounding, but much less quickly than it was growing before 2020.

Export performance has been stronger in May. Workday-adjusted growth in the first 20 days was almost 20% YoY, a recovery that continues to rely solely on semiconductors.

Consumer confidence fell in May, which would reinforce BOK concern about domestic demand. But the bank seems stuck for now because inflation expectations also rebounded.

Export orders rose in April, but continue to trail actual exports. One reason could be supply-chain restructuring, shown by the fall in the overseas production ratio.

This year's expected manufacturing pick-up has been patchy, but perhaps that is changing, with much stronger listed company sales in April, led by tech.

IP growth remains the bright spot in China's economy, with the pick-up in April being broad-based across industries.

Today's property price data for April weakened again. With PPI and CPI remaining weak too, the bounce in equity prices hasn't been enough to change the all-economy rate of deflation.

The April PPI data were soft, but the government's higher-frequency series for industrial prices, updated today for the first 10 days of May, continues to suggest a lessening of deflation.

External goods price disinflation is now over, with import prices now rising again across the region. That is likely to feed into stronger PPI, even in China.

In contrast to the common impression, China's global market share has been falling. Whether this is just a pause after the covid surge or something more permanent will be a big theme in 2024 for China's cycle, the CNY and China's trade relations with ROW.

On a headline basis, export growth accelerated again in the first ten days of May. That keeps alive the theme of industrial recovery, even if some of the details continue to look more sluggish.

Data in yesterday's Q1 monetary policy report showed another sharp fall in mortgage rates to well below 4%. But while they worked before, rate cuts in this cycle have shown no sign yet of boosting buyer sentiment.

Core CPI inflation continues to run at a bit below 1% annualised. That is too low for comfort, though for now doesn't show any sign of taking a new step down into deflation.

Cyclically, wage growth has slowed from over 2.5% YoY in 23 to 1.4% now. But the structural rise in manufacturing wage growth is persisting, which will have macro significance if the sector convincingly lifts out of recession.

There was quite a big fall in the EW survey in April, a warning that recent JPY volatility might be pushing up inflation expectations again.

While a bit stronger than the beginning of this year, the household survey shows real consumption spending still 2% lower than in 2019.

Another chart that challenges the idea that the structure of China's economy has changed much. Relative to GDP, construction is rebounding, while manufacturing is falling.

PMIs, CPI, wages, profits....most macro indicators look positive. The one weak spot remains consumption, with little sign of improvement through March.

Underlying trade values show the moderate export recovery that began in mid-23 is continuing, while imports are flat-lining.

The nominal export recovery across the region has lost momentum, with Taiwan's April exports fading YoY and MoM.

It is often thought that China is transforming into a mfg-led, services-light economy. Relative growth did slow post-15. However, as a proportion of GDP, the services sector has never been bigger.

It seems reasonable to think the cheap JPY is contributing to Japan's tourism boom. But Korea's visitor numbers are also closing in on pre-covid levels. Recovery in Taiwan, by contrast, is lagging.

Headline inflation dropped below 2% YoY in April, and core eased too. But underlying services inflation – a proxy for domestically generated price pressures – remains at almost 3%, a near 30-year high.

Prices might be drifting down a bit, and there's big product differences (steel weak, copper strong), but high-frequency data don't suggest any real deflation emanating from China's industrial sector.