East Asia Econ

Industrial output was stable in August, remaining below the peak of March, and leads suggest a further slowdown in the next few months. It is unlikely consumption will be robust enough to compensate for this industrial slowdown, even though retail sales ticked up in August.

With the labour market not particularly hot, and the CBC forecasting inflation of less than 2% next year, it isn't surprising that tightening remains slow. That creates depreciation pressure on the TWD, but for the time being, that's not a trend the CBC will feel a need to fight very hard against.

Taiwan's export orders to China continued to drop sharply in August. That is an indication of just how weak Chinese growth is, but is also a warning that a big change may be coming in overall world demand.

Taiwan's exports fell sharply MoM in August, matching the deterioration seen in the Korean export data that were released last week. Leading indicators continue to point to more downside ahead.

Inflation has likely peaked, and should decline in the coming months. The two risks round that are first, rising food prices, and second, cost inflation in services. There are reasons to think that services price might rise further from here, but for now, that seems like a tail risk.

The PMI suggests there's a big industrial cycle slowdown in the works. That is important for Taiwan and the TWD. Because it suggests more downside risk for the regional export cycle, the weaker PMI also has implications for Korea and China.

Taiwan exports look to have peaked. Shipments haven't started to fall yet, but the stalling in upwards momentum should still continue to weigh on the TWD.

Inflation in Taiwan looks quite well contained, particularly as the manufacturing sector looks to be rolling over. That said, given the disruption caused by the recent Covid-19 outbreak, there's probably more upside risk from services prices than there usually would be at this point in the cycle.

The sharp fall in the PMI highlights downside risks for the export cycle. That matters for Taiwan and the TWD, but also for the macro picture in Korea and China.

Incoming data remain mixed. However, the picture seems to be that exports have peaked, but remain somewhat resilient.

Headline inflation rose again in June to the highest since 2008. That was mainly food and goods prices. There are some signs of inflation broadening out, but for now, they remain tentative, and core is stable at around 2% YoY.

Exports held up again in June, but the outlook is changing as expectations for the semiconductor industry become more bearish. The recent equity sell-off suggests Taiwan's exports could be falling 10-20% YoY in the coming months.

Taiwan's manufacturing PMI has been surprisingly weak the last couple of months. There is a risk this is directly related to the China lockdowns which are now easing, but the internals of the survey are also soft, suggesting the underlying cycle is still weakening.

Orders data continue to suggest that Taiwan's headline export growth slows towards zero in the next 3-6 months. That probably represents a best case outcome for export data for the rest of the region.

The USD level of exports remained elevated in May, but it is increasingly likely that shipments will be falling in the next 6M.

Inflation is high relative to history, but remains modest compared to much of the rest of the world, and there aren't yet signs of a sharp acceleration from here.

The PMI suggests Taiwan is experiencing a usual down cycle in manufacturing. The caveats to this conclusion are that the recent slowdown has been worsened by the covid disruption in China and continuing supply shortages.

Regional leads are deteriorating, and are certainly pointing to a slowdown ahead. But the message from the indicators is somewhat mixed, so for the moment the slowdown looks likely to be modest rather than particularly sharp.

It has been clear for a while that the Asian export cycle has peaked and is moderating. The sharp fall in Taiwan export orders in April is the first sign that the slowdown is not becoming much sharper.

Quite a few warning signs of a real slowdown are now appearing, but Taiwan's exports aren't showing much weakness yet.

The robust growth momentum of the last couple of years hasn't completely disappeared, but the foundations are now definitely looking shakier.

Q1 growth was strong. The official leading indicator for March is pointing to a clear slowdown, but more gradually than the path suggested by equities.

Export growth remained strong in March. Leading indicators are pointing to somewhat weaker growth ahead.

The cycle has clearly peaked in Taiwan, but the gradient of the slowdown still isn't clear.