CPI inflation in May in Tokyo continued at the 2-ish% run-rate of the last 6M. But at a headline level, the composition is shifting, away from services, back towards goods. That will further dampen real incomes.
Taiwan must be about the only economy where covid provided a big boost to GDP, a lift that today's Q124 data show once again isn't disappearing.
In slides laying out a comparison with Korea, we argue that Taiwan's macroeconomy is close to a structural break to the upside. An export recovery that is as strong as has been priced in by equities would likely be the tipping point.
Consumer confidence for May has the same message as the earlier EW survey: the weaker JPY and rise in goods prices is once again eating into real incomes and eroding consumer confidence.
Import prices rose for the second consecutive month in April. It will be a surprise if domestic PPI inflation doesn't now follow suit, and in so doing challenge the idea that China is stuck in deflation.
We have a look at services price momentum and the BOJ view, with April services CPI, services PPI, and deputy governor Uchida's speech yesterday, remarks that he concluded by saying: "this time is different"!
Services PPI has been one of the best indicators of Japan's structural exit from deflation. The slowdown from mid-2023 had thus been concerning. But a rebound started earlier this year, and today's release for April was very strong.
Domestic activity carried the economy in 2022-23 as exports slowed. Exports are now picking up, but consumption is also remaining solid. Consumer confidence isn't particularly strong, but purchasing intentions are.
The summary slide from BOJ Uchida's speech today is complex. The last line of the text was clearer: 'I would like to conclude my speech with this phrase: “This time is different.”'
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
The April national CPI data only have incomplete hints of the transition the BOJ expects to domestically driven inflation. The more obvious trends for now remain renewed JPY weakness and labour market tightness.
High-frequency data continue to show a lessening of upstream deflation, though the change is being disproportionately driven by copper prices.
The uptick in underlying inflation in April wasn't much, but is still important, as it fits with the BOJ's idea of transition from import prices to services prices.
Covid disrupted the usual synchronisation between exports and domestic demand. Recent resynchronisation is positive for the outlook, happening not by domestic demand slowing, but exports picking up.
So far, the much-discussed rise in China's competitiveness has been most obvious in import substitution. With the export cycle now recovering, it is likely this year to also be seen in a renewed increase in China's global market share.
No surprises today from the BOK: it still wants to see inflation come down further. But it was important that the bank once again highlighted upside risks to inflation from "exchange rate volatility".
Updating these charts after Nvidia's results. Semis account for almost 50% of Taiwan's exports, compared with 20% in Korea. For now, that looks like a good dependence to have.
At 53.6, S&P's flash services PMI for May dipped a little from April, but remains well above the long-term average of 49.8. At the same time, the mfg PMI rose above 50 for the first time in a year.
Firms still aren't using the weak JPY to cut USD prices and increase volumes. Instead, the ccy weakness continues to flow straight into JPY earnings
Employment rose to another all-time high in April, keeping unemployment below 3%. This labour market tightness is striking when the mfg PMI has been below 50 for most of the last 2 years.
You might think that with property activity collapsing and a mfg boom, China would import fewer commodities and more capital goods. But what's actually happened is almost exactly the opposite.
Data today continue the theme of export sluggishness v domestic strength. Exports underwhelmed in April, but the post-covid pick-up in domestic machine orders continued through March.
This week's consumer and business surveys show recovering exports, weak domestic sentiment, but firm headline inflation. The BOK is unlikely to shift policy.
Chaebol dominance isn't new. But at least cyclically, what's good for large firms usually lifts the small too. But that hasn't been true in 2024, and the gap complicates the BOK's task.
Household borrowing is consistent with the BOK's on-off contention of a soft landing. It is now rebounding, but much less quickly than it was growing before 2020.