At near 2.5%, Korea's unemployment rate remains near multi-decade lows, but employment has been supported by jobs in the public sector and social services, while private sector employment has been soft. Interpreting those trends is made difficult by the supply-side changes of recent years.
Headline inflation dropped in November to 1.2% YoY, the lowest since early 2021. However, there are signs of a floor. The dampening impact on import prices of the short-lived appreciation of the TWD in April and May is now fading (and today's fx reserves show capital flow pressure on the currency…
The BOJ's consumption activity index has been a touch stronger the last couple of months, and so suggests PCE in the national accounts is off to a bit of a better start in Q4.
Weekly flow data show a dip in foreign buying of equities in Japan, though that is after a strong rise over the last six weeks. Bond buying is off the peak, as if Japan resident investment in fixed income overseas.
While according to the FAI data, the big problem in the economy is in industry, the implication of the official PMIs at the weekend was that the big new weakness is in services. Today's S&P services PMI didn't bear that out, coming in at 52.1.
There is no survey suggesting weakness in services in Japan, with today's PMI coming in at 53.2, a touch above the flash. The components were also firm: "optimism around future activity improved to the highest sinceJanuary"; "Upbeat forecasts for the year ahead also contributed to anotherincrease…
Sanae Takaichi's policies have been controversial with markets – and with China. But voters and consumers like what they hear. Opinion polls show the government's popularity is high. And there was a big bounce in today's consumer confidence survey for November.
The big worry for the BOJ earlier in the year had been tariffs, with the bank concerned that US policy would reduce exports and dampen profits. Today's Q3 corporate financial statement data from the MOF show earnings in manufacturing deteriorating, but only modestly.
Today's monthly BOP-equivalent data for trade in services in October suggest that the contribution from net exports is on course to fall in Q4. At the same time, the FAI data show investment growth is also declining fast.
Activity data in October were better. IP finally broke through the top of the range in which it has been stuck since early 2024. Retail sales also perked up, though that was after a sharp fall in Q3; in level terms, retail sales are no higher than in 2022.
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.
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.
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.
Before the covid pandemic, the domestic and external cycles in Taiwan were synchronised. The disruption of 2020 ended that, and the economy is still seeing the consequences: while exports have surged this year, retail sales have fallen.
Korean consumer sentiment improved again in today's November survey, which is significant given the boost from the fiscal handouts should now be fading. Among the main components, it was sentiment towards income that rose most.
Employment continues to rise in Taiwan, and that in turn is keeping the unemployment rate pinned at the lowest level since the early 2000s. The details don't suggest that is about to change, with no increase in furloughs, or decline in job switchers.
Three messages from the detailed trade data for October that were released yesterday:
Given the extreme supply-demand tightness in the memory market shown by the spectacular rise in spot DRAM prices, there must be some upside risk for Korea's cycle. But that still isn't appearing in the data, with export growth in today's data for the first 20 days of November remaining modest.
Today's Q3 data show the current account rising further to over 20% of GDP. The driver continues to be merchandise, which have risen sharply all year. That surge is probably now over, but today's export orders for October don't point to a sudden reversal; indeed, IT orders continue to creep up.
Inevitably, in her speech today, Koeda Junko talked about the uncertainties and risks. However, her remarks still gave the impression that she is moving towards favouring a rate hike. Two comments in particular stood out:
One way of thinking about Korea is that it is becoming more like the rest of East Asia, in at least two respects: it no longer has an inflation rate that is much higher than neighbouring economies, and like them, it is now also running a structural current account surplus.
Most cyclical indicators have improved in the last couple of months. That isn't really true for September machinery orders, though the average of the last three months – which, given the volatility of the data, is the best way to get the trend – did drop less quickly than in the previous few months.
China's overall exports were weak in October, but shipments of autos really weren't. Indeed, passenger car exports reached USD10bn, which is quite remarkable when in 2020 there were basically none.
Today's broad quarterly household credit numbers show a drop in growth, which is clearly what the BOK would have wanted to see. That is in line both with the monthly data, and the direction of the loan officer survey, which also indicates further slowdown ahead.
Since Q2, fx settlement data have pointed to China one again starting to benefit from net capital inflows. Today's settlement data for October show no change in that trend, even if the pace last month might have eased off.
