Paul Cavey

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China: profit share as low as 2009

The 17% YoY fall in profits in August is exaggerated by comparison with the spike 12M previously. But the details are sluggish. Corporate revenues haven't yet regained the level of November 2023, and except for early 2023, the profit share of GDP is lower than any time since 2009.

Korea – doveish BSI

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China – exports amazingly strong; imports remarkably weak

That data in the last few months show export volumes growing faster than pre-covid rates is remarkable. But equally significant for China and the world is the total stalling of imports. Before 2020 they were growing with exports, but since then, they haven't risen at all.

Region – Asia's two distinct dynamics

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Taiwan – much stronger in August

After a sluggish Q2, we'd started to think the best of Taiwan's recovery was over. But IP data today, as well as export volumes, are consistent with the big bounce seen in August export values. Retail sales were weaker, but still suggest much more resilience than consumption in Korea.

China – why only 20bp?

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Japan – upstream services inflation steady

Services PPI inflation eased back in August, but that was partly base effect. The BOJ's new high-labour content measure isn't that different, and remains near 3%. Sequentially, SPPI is running around 2%, but all the volatility since 2022 makes it difficult to discern the underlying trend.

Korea – not an all-clear

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Taiwan – mild export upturn intact

August export order data don't signal any change in direction in the modest export upturn of recent months. The more interesting shifts are structural. China orders are flat, and are now only 60% of US levels. The overseas production ratio is the lowest since 2009.

Japan – cold feet

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China – lowest building material px since 2016

Against the backdrop of today's flurry of policy announcements, a reminder of how much policy need to do. Industrial prices so far through September have continued to drop with building material prices now the lowest since 2016.

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Japan – firm services PMI, higher output prices

There's still little sign of economic damage from the market volatility of July and early August. Like other surveys, today's flash services PMI was strong. Input prices eased, but output prices didn't as "firms looked to pass higher cost burdens in to clients".

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Korea – exports still steady

After adjusting for working days, the pick-up in YoY export growth seen in the 10-day data was repeated in today's 20-day update. But that is largely base effect. Sequential growth has ticked up, but isn't repeating the upswing of 1H24.

Last week, next week

Japan – services inflation back to 2%

Taiwan – goldilocks

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China – the flood into time deposits isn't slowing

While data for the corporate sector are distorted by regulatory changes, this is still one of the most important charts for China macro. As long as companies and especially households are locking up their money in time deposits, it is highly unlikely that inflation and nominal growth rebound.

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Japan: machine orders sideways

Core machine orders are one of the BOJ's standard leading indicators, always getting a mention in the bank's economic outlook reports. The data are, however, volatile, and today's numbers for July don't show any new direction being established.

China – when will commodity exporters feel the pain?

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Japan: still no lift in export volumes

Japan's exporters haven't reacted in standard fashion to JPY weakness, not cutting prices to increase volumes. Indeed, volumes fell YoY in August. That contrasts with the clear recovery in the rest of the region. It means higher JPY earnings for exporters, but less incentive for domestic capex.

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Taiwan – no slowdown in property prices

Exports feel a bit peaky, and CPI inflation has eased. But property price inflation isn't cooling. Perhaps an export slowdown changes that – the fastest price gains are in Hsinchu, home of TSMC. But unless and until that happens, it is very difficult for the central bank to turn doveish.

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Last week, next week

A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.

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QTC: China – retirement age rising less clearly than longevity

This week's announced rise in the retirement age is economically welcome. But the rise of 3-5 years, implemented over 15 years, is modest. In that time longevity is likely to rise almost as much, meaning by the time this week's changes are completed, China will still be at square one.

China – GDP growth tracking 4%

China – still stuck in deflation