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Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
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Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
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Video
A summary of our latest thematic piece on services and inflation.
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Region – latest chart pack
A chart pack summarising our current views
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The East Asia Economist
Manufacturing is in recession, but employment is rising and core inflation not falling. With services normalising after covid, this unusual set-up can persist. That's particularly true in Japan, but in Korea and Taiwan too, it looks like a DM recession will be needed to bring down core inflation.
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Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
Public Post
Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
Subscribers Only
Last week, next week
A summary of what happened on East Asia Econ last week, and what to expect next week.
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Last week, next week
The East Asia Econ weekly summary.
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Last week, next week
A recap of East Asia Econ over the last seven days, and a reminder of what to watch over the next seven.
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Last week, next week
The East Asia Econ weekly summary
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Last week, next week
What happened on East Asia Econ last week.
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Taiwan – weak in January
The manufacturing PMI was very weak in January, showing that the industrial sector remains deep in recession. The best that can be said is that the data are so bad that they probably can't get much worse. CPI was stronger in January, but that likely reflects New Year holiday distortions.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.