East Asia Econ

High-frequency data continue to show a lessening of upstream deflation, though the change is being disproportionately driven by copper prices.

The uptick in underlying inflation in April wasn't much, but is still important, as it fits with the BOJ's idea of transition from import prices to services prices.

Covid disrupted the usual synchronisation between exports and domestic demand. Recent resynchronisation is positive for the outlook, happening not by domestic demand slowing, but exports picking up.

Updating these charts after Nvidia's results. Semis account for almost 50% of Taiwan's exports, compared with 20% in Korea. For now, that looks like a good dependence to have.

At 53.6, S&P's flash services PMI for May dipped a little from April, but remains well above the long-term average of 49.8. At the same time, the mfg PMI rose above 50 for the first time in a year.

Firms still aren't using the weak JPY to cut USD prices and increase volumes. Instead, the ccy weakness continues to flow straight into JPY earnings

Employment rose to another all-time high in April, keeping unemployment below 3%. This labour market tightness is striking when the mfg PMI has been below 50 for most of the last 2 years.

You might think that with property activity collapsing and a mfg boom, China would import fewer commodities and more capital goods. But what's actually happened is almost exactly the opposite.

Data today continue the theme of export sluggishness v domestic strength. Exports underwhelmed in April, but the post-covid pick-up in domestic machine orders continued through March.

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.