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The cycle is weak, and yet the market was surprised the PBC cut rates yesterday. Central bank rhetoric had been suggesting rates had bottomed. But low inflation and signs of rising real rates make it more likely that rates fall rather than rise.
The cycle remains weak, with the growing risk of a further step-down in the reminder of the year as exports slow. Following today's interest rate cut, further monetary easing remains likely.
Headline credit growth weakened in July, and even though M1 growth strengthened, the data don't suggest "stimulus" that can turn around the current trajectory of the economy.
Today's labour market report isn't of much consequence for the BOK. The pace of the recovery since 2021 has started to fade, but the labour market still remains very tight.
Today's July PPI and CPI data in China suggest again that deflation is a bigger risk than inflation.
China's cycle remains weak. Perhaps money data and excavator sales for July will reinforce the message of the construction PMI that stimulus is feeding through. Otherwise, the risk remains of a growth accident that, via a weaker CNY, gets transmitted to the rest of the world.
Taiwan exports look to have peaked. Shipments haven't started to fall yet, but the stalling in upwards momentum should still continue to weigh on the TWD.
The Economy Watchers survey fell again in July, suggesting no change in the slow pace of economic recovery out of the Covid-19 pandemic.
Exports remain resilient, but the leading indicators continue to point down, with imports of components slowing again in July. It is likely exports are contracting before the end of the year.
Korean July trade data were consistent with three themes for the regional export cycle: momentum is slowing; so far, it is a slowdown, not a recession; but leading indicators point to exports starting to contract before year-end.
Inflation in Taiwan looks quite well contained, particularly as the manufacturing sector looks to be rolling over. That said, given the disruption caused by the recent Covid-19 outbreak, there's probably more upside risk from services prices than there usually would be at this point in the cycle.
Labour market data continue to be solid, but not so tight as to suggest a build-up of domestically generated inflation.
Chinese exports have boomed since 2019. That boom isn't (yet) turning to bust, but it is likely ending. That's a big issue when the rest of the economy is so weak. Even without a new covid outbreak, there's a rising risk of a real growth accident in 2H22.
Korean inflation is probably close to peaking as the rise in goods prices starts to decelerate. But services price inflation remains firm, and while that continues, there isn't much room for the central bank to be able to relax.
The sharp fall in the PMI highlights downside risks for the export cycle. That matters for Taiwan and the TWD, but also for the macro picture in Korea and China.
The latest fall in Covid-19 cases could lift activity in August. But with property still very weak, inflation momentum softening and exports slowing, it feels that any upturn in growth would be short-lived.
The headline PMI was weak in July, and the details were soft too. There's no sign of the cycle finding a durable floor.
The negative correlation between inflation expectations and consumer confidence continues to hold. So, with inflation expectations rising, consumer confidence is falling quickly.
Various releases this week show that inflation is still rising and broadening, and that there's likely more to come. However, price pressures do continue to be driven more by global than domestic factors.
The labour market is reasonably tight. Further modest tightening is probable, but a real squeeze is unlikely when labour demand isn't rising, but the participation rate is.
Business sentiment and price indicators remain at high levels. That justifies more BOK tightening in the short term. But there are some signs of change ahead, with exporter sentiment clearly down from the peaks, and inflation leads also falling.
While consumer confidence fell in July., the bigger story is the very sharp rise in inflation expectations.
China's export market share gains show local firms remaining competitive, and that should make some individual equities interesting. But macro trends don't look strong enough to lift rates. Indeed, price indicators look more deflationary than inflationary.
June CPI was still quite strong. But there aren't signs of a transition from goods to services price inflation. Without that shift occurring, the BOJ has justification for arguing that inflation isn't broad-based, and thus that policy doesn't need to change.
Exports in volume terms are going sideways, but surging in JPY terms. The JPY value of imports is rising even more quickly, causing further deterioration in the trade surplus.