Paul Cavey

Region – monthly cycle slides

Last week, next week

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China - PMI details suggest a floor

The PMIs continue to suggest that, overall, there was no lasting improvement in the cycle after the September policy push. There are though some signs that things aren't getting worse any more, with both the construction PMI and employment indicators suggesting a floor.

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Taiwan – inflation expectations rising again

The rebound in price expectations in Taiwan's consumer confidence survey is starting to look interesting. It isn't just Chinese New Year, with the rise beginning in October last year. Certainly not grounds for the CBC to be cutting rates. Perhaps a reason to hike?

Region – big external surpluses aren't just about trade

Korea – BOK cuts, and hopes for fiscal

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Japan – SPPI inflation peaking?

In YoY terms, the trend in services PPI inflation is still up, but sequentially it is starting to look like it has peaked at a bit above 2%. There might get another boost from a strong shunto, but 2% pipeline inflation looks light for getting sustainable CPI of the same rate.

Last week, next week

Korea – still in a cutting cycle

Japan – inflation pain

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Korea – more export underperformance

Adjusted for holidays, and exports barely grew in the first 20 days of February. The big driver is the downturn in semi shipments. Equity performance suggests the relative underperformance of Korean exports relative to China and Taiwan will continue.

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Taiwan – another sign of shifting supply chains

Data today show Taiwan's export orders dipped in January, but that was likely because of the Lunar New Year. Our broader leading indicator shows export growth remaining around 10% YoY in the next few months. More interesting in today's data is the continued fall in the overseas production ratio.

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Region – an illustration of Korea's export problems

This is a shorter thematic note than usual. In the longer piece last week, I didn't come up with a chart that nicely summarised Korea's export challenge. I think I have it now. While Korea is holding on in DM, it is losing market share just about everywhere else, being pushed out largely by China.

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Korea – confidence up, prices down

Consumer confidence rose again in February but remains well below the LT average; moreover, the improvement is only being among younger people. At the same time, CPI and property price expectations softened. There will be more news tomorrow with business sentiment.

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China – less property price deflation, but only just

Deflation eased in January, but only slightly. That's no surprise, given mortgage lending also remained weak last month. The sluggishness is persisting despite low rates, and the failure of rate cuts to revive the quintessentially rate sensitive sector remains a standout feature of this cycle.

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Japan – solid services Tankan

Services sector sentiment in the Reuters Tankan remained elevated in today's February survey. Manufacturing is much weaker, and that remains something to be watching given the extra downside risk from tariffs. But in terms of Japan's cycle, Q1 is likely to be another decent quarter.

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Korea – household deleveraging

Today's Q424 data show a continuation of the pick-up in household lending from the trough of early 2023. But at 2.4% saar compared with 8% before 2020, the rebound is mild, and slower than GDP growth. For an economy where most indicators have been deteriorating, that's one bit of good news.

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Taiwan – upturn in wage growth holding

Like Japan, Taiwan had years of slowing wage and price inflation. And so, similarly with Japan, the turn in wage growth since the financial crisis is as much structural as cyclical. There's no sign of price inflation becoming problematic, but this wage picture suggests it isn't going back to zero.

Japan – wages support surprisingly firm consumption

Last week, next week

China – credit mixed, and need more evidence of deposit turn

Korea – employment improves, but only in the public sector

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China – real economy rates down again

Today's PBC data show another steep fall in mortgage interest rates in Q4. Rates are still 3%, so can go lower still. However, before 2020, real estate would be booming by now. That there's little reaction this time shows the problems in the real estate market won't be solved by rate cuts alone.

Region – export trends and market implications

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Japan – not simply import prices

Import price inflation did rise in January, but PPI inflation was much higher, and the relationship between the two has clearly weakened. One driver is the cutting back of gasoline price subsidies, a policy that had held back PPI even as import prices surged in 2021-22.