Three highlights from today's quarterly flow of funds data. 1) Unsurprisingly given the surge in profits, the corporate sector in Q1 became a net saver, and so from a savings-investment perspective it was firms that drove a lot of the increase in the CA surplus. 2) Helped by the related rise in…
Upstream prices remain elevated, but in the final 10 days of June started to fall on the back of the drop in the global oil price. As a result, China's PPI inflation will likely slow in June. The rise in the price of oil was the big driver of this year's sharp rise in PPI.
FX reserves fell by USD8bn in June, which by Taiwan standards is large drop. The decline happened despite the huge trade surplus, and so indicates a continued outflow by non-official investors.
On Friday, the BOJ announced the Q1 output gap. That was basically unchanged from Q4, reflecting the soft actual GDP prints of the past couple of quarters. That leaves the output gap moderately positive, which is a big shift from the negative gap under the BOJ's previous methodology.
Even more so than with the manufacturing surveys earlier in the week, today's S&P/RatingDog services PMI for China suggests a cycle that is doing quite well. I find it very difficult to believe that service activity really is now growing as quickly as it was before 2020.
The recent added momentum in Japan's cycle has come from manufacturing, but after the damage to sentiment caused by the Iran War, soft data for the services sector are now staring to improve again. The latest example was the rise in today's services PMI for June.
After withdrawing liquidity for the last few months, the PBC reversed course in June. That could be a signal that the capital inflows of the last few months have slowed, as the USD has strengthened.
The gap between the two manufacturing PMIs in China remains unusually large. The message from the official version is that activity in the sector is stagnant. Today's S&P/RatingDog version looks quite a lot better.
Taiwan's manufacturing PMIs ticked down in June, but the drop wasn't large, and not enough to indicate any real change in momentum in the sector. While easing from May, input price inflation remains elevated. More interesting I think is the non-manufacturing PMI.
The S&P manufacturing PMI fell in June, but that was partly because of "delays inreceiving inputs". The orders backlog was the highest in four years. Meanwhile, export data were strong again. The driver remains semiconductors, though non-chip exports have now begun to rise too.
The economic recovery from the covid pandemic has been led by services. But since the beginning of 2026, the industrial cycle has started to look stronger too, with demand created by the AI infrastructure build-out offsetting sluggishness in autos.
Sunday's data release showed headline growth in industrial profits ticked down in May to 20% YoY. That isn't slow, but the data are horribly noisy. After adjusting for seasonality, I think profits were flat on the month, leaving them at the top 0f the post-2022 range, but not breaking higher.
Consumer confidence ticked up in June. Sentiment is still depressed, but in June was the highest in more than a year. One driver of the rise in the last couple of months has been the drop in oil prices that is now feeding into lower pump prices for consumers.
This is something I don't get to say very often: retail sales in Japan are strong. The rise in May continues an upturn that began earlier in the year.
I spent some more time today looking into this year's round-trip in import volumes. A lot of that can be explained by semiconductors, with imports of other machinery little changed. That stability contrasts with the weakness of FAI, but also doesn't suggest any upturn.
There's still no sign of an end to this remarkable period of Taiwan economic growth. The government's monitoring index continued to flash "red" in May, showing the economy – you guessed it – remains hot.
Today's IIP data by region show the rising importance of the US as an investment destination for Korea. In 2025, the US accounted for almost 50% of the total value of Korea's overseas investments.
Japan's exports in the first 10 days of June ticked up. On its own, that could be dismissed, but it does continue the upturn of the last few month. Tokyo CPI inflation in June rose, but the data continue to distorted by government subsidies: public services prices in the CPI in recently falling by…
The big change in trade patterns coming into 2026 was the sharp rise in imports, because of both values and volumes. But in data for May, import volumes are back to where they were at the end of 2025.
The BOJ's flow of funds don't give an exact measure of the government's fiscal position, but they do provide a guide. According to today's Q1 data, the deficit is running at around 2% of GDP, gross government debt has fallen to 200% of GDP, and the BOJ holds 52% of JGBs outstanding.
Industrial prices in China remained firm through the second 10 days of June. Oil prices did fall, but that was offset by a continued steep rise in coal prices, presumably a consequence of the shortages of crude in March and April.
YoY growth in IP eased in May to 17%, the slowest in more than a year. That was largely base effect; MoM growth in May was unchanged at a little over 20% annualised.
Headline services PPI inflation was unchanged in May at 3.3% YoY. Core ticked up, but that was because of inflation in sectors with low labour intensity, and so rather than wages, likely reflects the rise in energy prices that boosted headline from February.
Export orders in May rose to another new high, with the big boost being provided once again by the semiconductor sector. At an average of 53.7% YoY in the last three months, growth in export orders is only just shy of the record achieved in the recovery after the global financial crisis.
Today's Q1 financial statement analysis by the BOK showed a big bounce in margins. That improvement was helped by the recovery in the construction cycle that has been seen in other data, but the big driver, of course, was the surge in margins in the tech industry.
