Paul Cavey

Japan – profitability holding up

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Korea – November exports still soft

No wonder the BOK is worried. For exports, there was only a small rebound in November from the weakness of October. And, with exports closely following the lead from the equity market, it is unlikely there will be any renewed recovery from here.

Last week, next week

China – headline PMI ok, details weak

Japan – price-wage story still intact

Region – Plaza II

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Region – Taiwan still leading

The contrast between the Taiwan and Korean cycles is striking. In Taiwan, retail sales, while now rolling over, have been strong, and the decline is being offset by continued growth in IP. In Korea, weak retail sales aren't getting better, and IP continues to flatline.

Korea – BOK acts on growth

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Taiwan – leading indicator declines

Today's monitoring indicator from the government is another sign that the cycle has peaked. Activity is unlikely to get in a lot of trouble if TSMC continues to grow at around 20%. But it is difficult to see how growth can now surprise on the upside.

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China – profits still weak in October

Profitability ticked up in October, but that was after a big fall the previous month, and the smoothed trend is still down. Relative to GDP, profits have only been lower than they are today in 2008-09 and 2020. The big drag continues to be heavy industry more than manufacturing.

Korea – further cycle deterioration

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Japan – services PPI inflation stronger again

The trend rise in upstream services PPI isn't faltering. With a decent MoM jump, the YoY ticked back up in November to the all-time high of 3.1%. This steady rise remains the clearest indicator of Japan's structural exist from deflation, and suggests also that the BOJ's cyclical story remains alive.

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Korea – no consumer turnaround

November consumer sentiment remained soft, staying barely above the survey's long-term average. That doesn't suggest consumer spending, which has been weak, is about to revive. At the same time, price expectations, firm all year, ticked up last month, warning that disinflation has run out of steam.

China – export-led growth continues

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China – no slowing of export volumes

Latest data from the customs administration show no let-up in the export volume surge that began earlier this year. China's exports are growing as quickly they were during the pandemic. That's remarkable, given that in 2021-22 world trade was growing strongly, now it is hardly increasing at all.

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China – watching what to watch

A few weeks ago, we laid out a list of indicators to be watching to track whether all the policy announcements from China were generating a turn in the cycle. Looking through that list now, and it remains difficult to feel excited that they have.

Last week, next week

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Taiwan – unemployment rate still low

It looks like labour market tightness has peaked, but the change isn't big enough yet to impact monetary policy. After ticking up in September, the unemployment rate was stable at 3.4% in October. That keeps it at a level not seen since the early 2000s.

Japan – activity softer, prices up

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Korea – no bounce in November exports

YoY growth in Korean exports in the first 20 days of November didn't do much to reverse the October slump, a decline that feels more significant given the similar drop in the PMI in the last couple of months. Semi exports are still rising, but not much else is.

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Taiwan – export leads deteriorate

October's export orders continued to creep up, but nothing more than that, and the DI has turned down, warning of downside risk from here. Admittedly, export orders have been tending to lag actual exports, but with the PMI weakening too, we've probably seen the best of the export cycle.

Korea – more doveish, more quickly

Japan – not positive enough

Last week, next week

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Taiwan – reorientation to US

Today's October FDI data once again illustrate the big reorientation of Taiwan's investment and trade flows away from China and towards the US. For FDI that's been encouraged by Biden subsidies, but Trump doesn't like those, nor the big trade surplus that Taiwan now runs with the US.