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With a bounce in reported retail sales, it looks like economic growth in October got back to the government's 5% growth target. Overall, though, the tone of the data was rather mixed, with real estate activity in particular still extremely weak.
In recent years, trade and FDI flows from Taiwan and Korea have clearly shifted from China to the US. That's what Trump One and Biden wanted, but Trump Two won't like the rising trade deficits, or the CHIPS and IRA subsidies. If he threatens tariffs, will Taiwan offer a stronger TWD in response?
The opinions from the October BOJ meeting show a bit less concern about US uncertainty. That seems premature, given the election, but comments on the domestic economy also don't suggest any change in the bank's fundamental view. Survey data have been a bit softer, but not yet uniformly.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
The bond swap does represent substantive policy. But there still isn't support for consumption, so this does look like an effort to put a floor under growth, rather than produce a new upcycle. And while that will probably be successful, stability will be endangered by a new round of Trump tariffs.
A chart pack arguing that consumption hasn't been as weak as is often imagined, but that downside risks are growing as wage and property income falls. Policy solutions need to overcome the weakness of non-wage incomes, the strength of savings, and the pro-investment official mindset.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
The boxes in the BOJ's full outlook report that look at the labour market and wages don't suggest any weakening of the bank's underlying confidence – increasingly evident before July – that Japan's inflation is sustainable. The implication is that rate hikes remain on the agenda.
Some analysis of the weakness of consumption in Asia. As the opening chart suggests, the big underperformer isn't either China or Japan, but rather Korea. The clear outperformer is Taiwan.
No surprises from the BOJ (yet): the July forecast for underlying inflation to remain around 2% was maintained, as was the policy caution since August that stresses uncertainty in outlook for the US. There's still the press conference and full outlook report to come.
Likely driven by the sentiment-driven rise in prices, the manufacturing PMI bounced back above 50 in October. But there was barely any change in either the services or construction, PMIs, and both will need to improve to think that the economy really is turning around.
The government yesterday published its monthly series for the profits of the industrial sector. I am always a bit sceptical of the quality of these data. But if you want a trigger for the recent macro policy push, then the sharp fall in profits in September fits the bill.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
With the BOJ emphasising the twice-yearly patten of service prices hikes, with the second round falling in October, today's Tokyo CPI data are important. They do show services prices rising, and although the details are messy, core sequential inflation in Tokyo is also continuing to run near 2%.
If the BOK was only looking at growth, then data today would give it plenty of room to cut faster, with both Q3 GDP and October business sentiment weak. However, the rise in US rates and consequent weakening of $KRW will be starting to constrain the bank once again.
The slump in confidence and retail sales don't indicate a major cyclical weakening of consumption. That's partly because households have been running down excess savings from covid. But with savings now normalising, consumption is becoming more vulnerable to the deterioration in the labour market.
There's a possibility that TSMC's success is pushing Taiwan into unchartered waters, where the CBC needs to sound hawkish, when the external imbalance is as big as it has ever been. If Taiwan's period of zero inflation has passed, there's a good chance TWD undervaluation will be challenged too.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
Inflation was softer in September, but the economy still looks on track, with exports and household income up, and early signs of another strong shunto round. At the same time, the JPY is weakening again. This backdrop means the BOJ faces a very tough communication challenge at its October meeting.
Looking at today's data, the driver of all the recent policy activism is to get growth back to the 5% target. That doesn't suggest a big rebound in the nominal growth that equity investors need. The upside risk is this policy push is happening when there are tentative signs of property stabilising.
Cyclically, the labour market continues to look tight, with the UE rate again near multi-decade lows in September. But assessing the inflation implications is made tricky by big ongoing supply side changes, especially the rise in female part rate. Wage growth looks strong, but isn't accelerating.
Cyclically, credit is very weak, especially private sector borrowing. But credit is still rising relative to GDP. That's partly because of government borrowing. But it is also because of weak nominal GDP growth, and that is unlikely to change until the sharp fall in M1 relative to M2 reverses.
Exports dropped quite sharply in September. China is still making share gains in autos especially, but this is another sign that the best of the recovery in the regional export cycle is probably now done. That matters for China when exports have been the strongest sector of the economy.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
Core inflation, which took one step-down during covid, has this year dropped again. Indeed, China has now been in sequential core CPI deflation since May. This implies rising real interest rates, and, with PPI turning down again too, a worsening debt burden.