East Asia Today
The big event today was the BOK meeting. The bank was a bit more constructive on the outlook, but data that was separately released show labour market conditions remaining weak. Elsewhere, profits in China are flat-lining, exports in Japan aren't dropping, and macro data in Taiwan remain strong.
YoY growth in industrial profits improved again in October. That wasn't just because of base effect; in level terms too, profits rose. However, that still leaves the absolute amount of profit near the bottom of the range of the last few years, and at only a little over 5% of GDP. A material recovery is unlikely to happen without a meaningful upturn in PPI.
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It still isn't looking like tariffs have caused real disruption to Japan's economy. Data today show Toyota's production and sales holding up through October, and partial month statistics from the MOF similarly indicate no change in direction for exports through the first ten days of November.
Cycle update – was when, now also whether. The BOK didn't raise growth forecasts above potential, but still signalled some concern about the resilience of inflation. That sounds a touch stagflationary, and was used to justify a step back from its loosening stance. In the bank's outlook, growth only gets above potential in its chip-driven upside scenario. Stronger growth will be needed to produce real recovery in the labour market: JOLTS data for October released today show labour market conditions at the beginning of Q3 remaining soft.
Taiwan's leading indicator improved in October, indicating nominal growth momentum remains strong. That isn't because of consumption. Overall consumer confidence did tick up in today's November survey, but only just. Purchase intentions rose more quickly, but even that increase looks underwhelming in light of this month's fiscal handouts to consumers.
