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The Covid-19 situation has improved, but not by enough to declare the all-clear. Policy has eased, but not by enough to ensure recovery when lockdowns do end. There's more debate about giving help to households, but further loosening still seems likely to focus on companies and investment.
The 5-year Loan Prime Rate was cut 15pb today. That was bigger than market expectations, but property equities rose only modestly. That is likely a reflection of how weak activity currently is, and thus how much work still needs to be done to turn things around.
It has been clear for a while that the Asian export cycle has peaked and is moderating. The sharp fall in Taiwan export orders in April is the first sign that the slowdown is not becoming much sharper.
CPI rose in April, with the BOJ's preferred measure rising above 2% YoY for the first time in Governor Kuroda's tenure at the BOJ. The leads now suggest a peaking, which if right, would likely be positive for domestic economic momentum.
Headline YoY export data in April were reasonably firm. But exports fell quite sharply MoM. Downside risk for the regional export cycle is increasing.
Japan's machine orders bounced in March, but not by enough to change the overall picture. That continues to look like a continuation of the sluggish recovery in domestic capex of recent months, and export growth slowing to zero.
Q1 GDP data show no change in Japan's sluggish recovery out of Covid-19. The leads suggest GDP bounces in the next 3M, which is believable, given the potential for better domestic services activity. At the same time, the downside risks for exports appear to growing.
As was seen with other indicators for the property market in April, the tentative recovery in housing prices of the last few months also lost momentum last month.
Neither the drop in Korean CPI before 2019, nor the demographic and deflationary experience of Japan, tells us anything definitive about the outlook for price trends in Korea. In fact, it is likely that the country's fiscal position allows Seoul to respond to ageing in a way that isn't deflationary.
Economic activity came to a halt in April, and given the government's priorities, can't restart until lockdowns end. The PBC has offered more policy support, but given the hole the economy is in, not enough yet.
Chinese GDP is almost certainly contracting once again. The quality of the data makes it difficult to say how deep the fall is, but by my rough estimate, RGDP declined by perhaps 2-3% YoY in April.
The credit data were weak in April. That's certainly in part due to the covid lockdowns, but it doesn't feel like there is enough policy support yet to ensure recovery if and when the virus situation improves.
The Economy Watchers survey was solid in April, which suggests a constructive outlook for the cycle, with perhaps a touch of upside risk compared with the other advanced economies.
There's nothing in the labour market data for April to make the BOK less hawkish.
Food price inflation rose in April, pushing up overall CPI. But core remains subdued, and PPI inflation fell back.
Probably, the all-out approach to beating covid is the government merely repeating the 2020 Wuhan play book rather than giving up on growth. But there are other explanations, and it isn't yet clear where growth will come from this year.
Quite a few warning signs of a real slowdown are now appearing, but Taiwan's exports aren't showing much weakness yet.
Exports declined 6% MoM in April, the biggest fall in any normal month since April 2019. As they did then, the lockdowns probably explain some of the decline, and the leads, while clearly pointing down, don't point to the rate of decline in April being sustained. Still, this is an important data point. Across the region, there's growing indicators of a real export slowdown that will
Overall CPI inflation in Tokyo rose to 2.5% YoY in April. The measure of all items less food, which is the official target for the BOJ, reached 1.9% YoY, which excluding the sales-tax boosted inflation of 2014, was the highest in several decades. A lot of this reflects rising energy prices, a trend which more recently has started to fade. But core CPI (inflation excluding food and energy
For Li Keqiang and his mission impossible to get to 5.5% growth this year, the only silver lining in the very weak April Caixin PMI was that respondents were somewhat positive about the medium-term.
The robust growth momentum of the last couple of years hasn't completely disappeared, but the foundations are now definitely looking shakier.
The last BOK monetary policy meeting clearly showed that inflation was front and centre for the bank. Today's inflation data do nothing to change that prioritisation
Consumer confidence managed to improve in April, but just a touch. The optimistic argument would be this is just the beginnings of a more sustained lift as recovery in the services industry from covid finally gets under way.
The export cycle is showing clearer signs of at lest peaking, if not starting to roll over, with headline YoY export growth slowing again in April from 18.2% in March to 12.6%.
The government's view that it is homebuilders not homebuyers who are the "speculators" has big implications for where the property cycle goes next, and what that means for the economy.