Region – the structural rise in wages
Not just in Japan but Taiwan too, there are signs of a structural break from persistently low wage inflation. The implication is that the gap between nominal monetary settings between both and the US is likely to be narrower in the future than it has been in the past.
Taiwan – everything but exports
Exports and manufacturing remain sluggish, but the leading indicators look strong. At the same time, services activity remains firm, unemployment is at 20 year lows, and inflation at 20 year highs. If exports do kick in as the leads suggest, it is easy to imagine the central bank having to hike.
Taiwan – what voters should ask about the economy
This note is a bit different to our usual offering. It is still relevant to investors, but it is more of a guide to the economic issues that I would be thinking about if I were a voter in Taiwan. That includes one observation, and five questions that politicians should be answering.
Taiwan – firmly on hold
The CBC kept rates on hold at its quarterly meeting today, and doesn't look in a rush to make a move either up or down any time soon. It expects modestly stronger GDP growth in 2024. It forecasts inflation to fall, but the expected core rate of 1.8% would still be high relative to Taiwan's history.
Taiwan – wage growth still decent
Wage growth has slowed, but the three-year trend remains the highest in 20 years. The same is true of core CPI, and both make sense with unemployment being the lowest since the early 2000s. The labour market isn't yet pointing to a significant deceleration in inflation.
Region – KWD v TWD
Exports look to be picking up, and if that continues, there isn't a convincing case for rate cuts. There are signs that the recovery is stronger in Taiwan, which makes sense given structural competitiveness. With ultra-robust external finances too, that makes prospects for the TWD look better.
Taiwan – inflation down, not yet out
Sequential inflation dropped back to zero in November, but average core over the last three months remains elevated. With the domestic economy holding up, and exports starting to rebound, there isn't a strong case for rate cuts. That will matter for the TWD if exports really do rebound from here.
Taiwan – weaker consumption, stronger exports
Desynchronisation is still the theme, but the components are changing. Momentum in consumption and services, which drove growth in the last 12M, is now fading, but the export recession is easing. The direction for CPI and the CBC will depend on how far exports now recover.