Wage growth is quite strong in Taiwan, particularly relative to the weakness of the manufacturing cycle. So far, the strength is more apparent in manufacturing. It will become more important for inflation if it starts to show up in services, where productivity growth is slower.

Exports ticked up in February. The export cycle could be bottoming out here, but there's not a lot of sign of a real rebound. Inflation softened in February. It is low by international standards, but somewhat elevated relative to Taiwan's own history.

The Taiwan February PMI surged to the highest since June 2022. But this was partly because the whole of the Lunar New Year holiday fell in January, meaning there were more working days in February 2023 than any since the survey started. That has relevance for thinking about China's PMI too.

The case for a shift away from tightening is clearest in Taiwan, where the cycle is weak and inflation modest. Our model already points to a big fall in the likelihood of further tightening. It isn't yet suggesting, though, that loosening is on the table.

Earnings and hours worked suggest that although economic activity is contracting, wage growth is holding up, particularly in manufacturing. Wages should be getting support from the post-2020 surge in productivity, but the gap between productivity and wages has been large for years.