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Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
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Taiwan – export recovery stalls
Far from gaining momentum, Taiwan's exports fell in May. That is at odds with some other indicators for the mfg cycle, but as long as exports are soft, the overall cycle will be too.
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China – gradual export recovery
The big export growth markets of recent years – autos, BRICs, ASEAN – have lost some oomph. But cyclically, the modest recovery in exports is continuing, particularly in CNY terms.
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Taiwan – services inflation still near 30-year highs
Services inflation will likely ease, but there's upside risk for inflation overall, because of a potentially big rise in exports when import prices are recovering, and unemployment is low.
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Japan – not data dependent
Of course, headline data matter. But not as much in Japan as elsewhere. Official data don't suggest a tightening economy, but in the last 6M, the BOJ has nonetheless become more confident that Japan is heading to sustainable inflation. We'd expect more rate hikes soon.
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Japan – stronger wage growth, probably
Wage growth in Japan is solid, and the macro backdrop, such as today's services PMI, indicates is probably accelerating. However, the pick-up isn't showing up in all the data.
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Korea – inflation eases further
There are some signs of stickiness in services inflation, but May data show that, overall, CPI continues to move in the right direction for the BOK.
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Region – mfg recovery, but still modest
The regional mfg cycle is recovering, but gaps between official and S&P PMIs mean it is difficult to gauge strength. However, all surveys do point to a broad-based firming in input price inflation.
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Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
Subscribers Only
Japan – same macro dynamic, different policy backdrop
Data this week show a return to JPY-driven inflation that erodes consumer incomes and spending. But shifts in BOJ language suggest a central bank that is less doveish, a shift that should start to matter for the currency.
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China – manufacturing PMI down again
Without effective property policy, there is still a mildly positive macro story, based on a rebound in PPI, and stronger exports. The PMI offers support for the first, but not the second.
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Region – Korea and Taiwan chart pack
In slides laying out a comparison with Korea, we argue that Taiwan's macroeconomy is close to a structural break to the upside. An export recovery that is as strong as has been priced in by equities would likely be the tipping point.
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Japan – service inflation update
We have a look at services price momentum and the BOJ view, with April services CPI, services PPI, and deputy governor Uchida's speech yesterday, remarks that he concluded by saying: "this time is different"!
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Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
Subscribers Only
Japan – mixed underlying inflation
The April national CPI data only have incomplete hints of the transition the BOJ expects to domestically driven inflation. The more obvious trends for now remain renewed JPY weakness and labour market tightness.
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China – is that it for the export pause?
So far, the much-discussed rise in China's competitiveness has been most obvious in import substitution. With the export cycle now recovering, it is likely this year to also be seen in a renewed increase in China's global market share.
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Korea – no surprises from the BOK
No surprises today from the BOK: it still wants to see inflation come down further. But it was important that the bank once again highlighted upside risks to inflation from "exchange rate volatility".
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Korea – patchy cycle, still no cut
This week's consumer and business surveys show recovering exports, weak domestic sentiment, but firm headline inflation. The BOK is unlikely to shift policy.
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China – the buyers' strike in property
Friday's funding for buying inventories looks small. But with falling price expectations leading to a buyers' strike, it is a step in the right direction. This buyers' strike has cut construction. By keeping savings in the banks, it has lifted the S-I and CA surplus, and lowered velocity and CPI.
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Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
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China – property down yet again
Property remains in a deep funk, and while the government talks confidently about a successful transition to new growth engines, all the policy action indicates increasing concern that real estate remains so weak.
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Korea – no change in the labour market
Headline developments in the labour market are consistent with the BOK's outlook for a moderation in tightness. However, the big structural changes – such as the rise in female part rate – mean these headline developments don't tell the whole story.
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Japan – consumption drags down GDP again
GDP contracted again in Q1. The big driver remains the weakness of consumption, dragged down by the weak JPY and inflation eating into real incomes. Partly as a result, it seems to us that the BOJ is signalling it will raise rates more than the market currently thinks.
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China – slide pack
A chart pack laying out our views on China. We argue that deflation is more cyclical than structural; consumption and services have recovered; and that property inventory policy would mean real upside risk.
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Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.