Strong exports but weaker upstream prices in China. In Taiwan, TSMC's June sales suggest the upcycle in exports isn't over yet. At the same time, rapid growth in GDP is boosting tax revenues.
China's exports continue to be strong. The rise in prices of semiconductors is playing a role, but so is the sharp increase in auto volumes, which is now over 1mn vehicles a month. Protectionism in the rest of the world has yet to disrupt these trends, which thus continue to support China's GDP.
Korean early trade data is always noisy, but today's numbers for the first 10 days of July don't show any significant change in underlying strength in exports and the trade surplus. Wage growth in Taiwan of around 3% likely means a floor for core CPI of 2%.
Cycles show signs of broadening, towards capex and services in Taiwan and Korea, and exports and consumption in Japan. This provides an opportunity for CBs, especially the BOJ, to become more hawkish. The question for markets is whether this can finally stop currencies from weakening.
Corporate price data for Japan show the impact on the terms of trade of costlier oil imports continues to be offset by higher prices for chip exports. Nonetheless, rising import costs are pushing up PPI. In Taiwan, headline data show the gradual acceleration in underlying wage growth is continuing.
Lots today: no-change inflation data in China, a strong sakura regional report from the BOJ, Taiwan's foreign trade showing peaky exports but strong capital goods imports, and evidence that the strong rise in nominal GDP growth is boosting tax revenues in Korea.
My latest video, discussing why inflation risks won't end even if the Iran War eventually does. The reasons: both cost-push and demand-pull from the semiconductor boom, dynamics that are being reinforced by the cheapness of currencies.
Average CPI and PPI inflation remained relatively elevated in June. However, most of the rise has been because of external factors, and leading indicators show that for now, the peak has likely been seen.
The dip in Japan's CA surplus in May was not enough to alter the upwards trend, bank lending was strong in June, but the EW survey recovered only modestly in July. In Korea, the huge CA surplus rose further in May, but so did selling of domestic equities by foreigners.
The flow story behind KRW weakness has transitioned from overseas buying by domestic retail to domestic selling by foreigners. Two other factors help inform the exchange rate: correlation with the JPY and, perhaps, a BOK that is late in hiking given the huge acceleration in NGDP growth.
Today, an update on the household sector in Japan with May wage and consumption data. Also, inflation data for Taiwan in June, and the Q1 flow of funds in Korea showing equities now account for 30% of household assets, up from 20% just a year ago.
June's core inflation of 2.3% isn't high in an absolute sense. But outside LNY, it is the highest since the 1990s, and, remarkably, above both the policy rate and 10-year yields. Energy inflation will ease, but with wage growth of 2.7% and rising, and equity prices strong, rates really look too low.
Today's May consumption activity data were stronger again. That rise can be explained by three factors: a temporary boost as purchases of household appliances are brought forward, decent – though in May, not necessarily stronger – wage growth, and perhaps, a wealth effect as asset prices rise.
