Paid Members Public Region - a floor in Q1? Exports across the region fell by -7% on average in December. By the end of Q1, the rate of contraction is likely to double, led by bigger falls in shipments to the US and EU. Beyond that, there are tentative signs of a floor, as DM sentiment surveys bounce, and China emerges after covid. Paid Members Public Taiwan – contracting Taiwan's GDP contracted in Q4. The labour market was stable at a headline level in December, but employment in manufacturing did fall. We continue to think Taiwan will be the first to cut, with the risk being any lift that results from China's re-opening. Paid Members Public China – worse than it looks If there was a surprise with the Q4 data, it was that the official measure of GDP managed to grow. The details were weak, with only household savings rising strongly. Those savings provide a platform for a rebound in 2023, though not if households think their income growth has permanently slowed. Paid Members Public Japan – inflation back to 2% Import price inflation eased in December, suggesting CPI inflation falls below 2% YoY in 1H23. On this basis, the BOJ shouldn't be tightening. But having opened the door to change in December, the bank faces an enormous task if it wants to convince the market that rates aren't moving further. Paid Members Public China – property floor Official December data point to property prices bottoming out. That isn't unexpected, given the ending of zero covid and other signs that property prices have picked up. Cuts in mortgage rates suggest there could be quite a big bounce in prices, but that needs household confidence to recover. Paid Members Public China – not much change After a big fall in November, the trade data were less eventful in December, in MoM terms hardly changing at all. That means YoY growth is still deteriorating, and leading indicators point to that continuing through at least Q1. Paid Members Public Korea – last hike The BOK hiked again today, but the meeting gave strong hints that this is the last in the current cycle. The probability of a cut will likely start to grow in Q1, though for the BOK to actually do that, the bank will need more confidence that inflation is going to decline. Paid Members Public Japan – sluggish recovery The EW survey of corporates and households continues to suggest modest recovery. It can be hoped that household sentiment improves from here as inflation comes down. That will be helped by the stronger JPY, though data released yesterday confirm very large JGB purchasing by the BOJ in December. Paid Members Public China – end of the deflation scare Inflation ticked up in December, and it is fairly easy to predict that China's deflationary scare is over. It is more difficult yet to say what sort of inflation comes in its place. The ending of zero covid means higher inflation, but also erodes the usefulness of the usual leading indicators. Paid Members Public Japan – steady consumption growth There's volatility from month-to-month, but the BOJ's measures show that broadly, the acceleration in consumption growth seen since late 2021 is holding. That's even though the BOJ's consumer confidence survey shows a high level of pessimism, with particular dissatisfaction about prices. Paid Members Public Korea – unemployment up Unemployment rose and employment fell in December. This deterioration in the labour market is part and parcel of the BOK's attempts to control inflation, and weaker data for one month won't start the bank loosening. But the December data do make further hikes less likely. Paid Members Public China – weak credit Credit and monetary data remain soft. In itself this isn't vital for markets, which can think the ending of zero covid matters more than anything else. But monetary data, particularly the willingness of households to embrace financial risk, will affect the sustainability of any upturn. Paid Members Public Japan – 3.5% core services CPI Tokyo CPI accelerated again in December, with further evidence of a broadening in price pressures away from just imports and goods. Underlying services inflation looks to be running at around 3.5% YoY, and with the economy continuing to open up after covid, a further increase is likely from here. Paid Members Public The East Asia Economist Our model suggests the BOK doesn't hike this week, and the inputs point to the bank being pulled into loosening territory during the year. The risks are that domestic factors, rather than exports and the industrial cycle, prove to be bigger drivers of inflation than they have been in the past. Paid Members Public Region – export air pocket The region's exports in November fell YoY for the first time since 2020. The weakness has so far been focused in China, but exports to the US are now falling quickly. With the leads still falling, there is a likelihood of a real air pocket in growth in early 2023, and pressure for policy loosening. Paid Members Public The East Asia Economist The 1997 double play isn't yet at work, and the HKD doesn't look as over-valued as then. But Hong Kong does now face a double whammy of Fed tightening and zero covid. With maintenance of the peg ultimately being a political decision, the question is how much economic pain the authorities can take. Paid Members Public Region - exports to contract Regional exports remain on track to fall by about 10% YoY by the end of 2022. That deterioration will continue to put downwards pressure on currencies, particularly the TWD and KRW, but the pace of depreciation should begin to lessen. Paid Members Public The East Asia Economist Since the pandemic began, productivity has probably increased more quickly in Taiwan than any other major economy. As a result, Taiwan isn't facing the higher inflation and rates being experienced elsewhere. Taiwan's competitiveness instead reinforces structural trends for a stronger TWD. Paid Members Public Region – foreign trade Foreign trade data releases from Japan, Taiwan, and Korea today aren't entirely consistent, but it does look like exports are no longer growing, with signs of a slowdown in demand from the US beginning to appear. Paid Members Public Region - March/April exports External momentum has softened in recent months, but the downturn hasn't yet become very sharp. Data this week from across different economies suggests that there's no change yet in this picture.