East Asia Econ

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.

The PMI shows strong services momentum and prices charged rising "at its steepest since April 2014...reflecting another sharp rise in input costs....which was mostly linked to greater salary payments."

PSL lending, which seemed like it might become a thing for 20204, hasn't: yesterday's April data showed no new lending, so with previous loans maturing, PSL outstanding has fallen back again.

The S&P PMI shows China's services sector continues to grow at a solid rate. The outlook also remains firm, with new business growing in April by the quickest rate in almost a year.

The market focus in on real wages, but the elderly are even worse off than workers, the result of a policy of deliberately cutting pensions in real terms.

There continue to be signs that PPI inflation will turn positive in the next couple of months. That will ease an important source of investor concern.

Rather than a currency crisis, the importance of the weaker JPY for the macroeconomy is via the purchasing power of consumers. In this respect, April consumer confidence isn't too bad: down a bit, but still well up from the lows.

The PBC's Q1 urban depositor survey shows the housing market still hasn't bottomed, with price expectations falling to yet another new low in the survey's history.

The S&P PMI showed the manufacturing sector grew in April for the first time in two years. But the PMI was still only 50.2. That's not much after such a long recession – and all the excitement about AI.

Headline inflation remains around 3%. But that's because of food and energy. The trimmed mean is now at the BOK's target of 2%.

There is an export recovery, but in value terms it still doesn't look so strong, with full-month YoY growth through April struggling to get much above 10% YoY.

Q124 growth was subdued, but Taiwan must still be one of the few economies both to have grown more strongly during covid, and to have since managed to retain the gains made.

Both mfg PMIs for China were above 50 in April. There's some domestic bright spots, but the strength in the S&P PMI is all about exports.

The labour market is tight, profits are up, business sentiment is strong, and inflation is higher. The one area of weakness is consumption, and that has yet to change.

Falling prices are often used as evidence for China exporting overcapacity. But export price deflation is now easing, as the base effect of the big inflation of 2022 fades.

As has been true in Japan, consumer confidence in Taiwan remains inversely correlated with inflation expectations, implying nominal wage growth is too low.

I suppose it isn't really surprising given exports and the trade balance, but the bounce back in the manufacturing share since the early 2000s is still rather remarkable.