East Asia Econ

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.

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.