Paul Cavey

Region – exchange rates and inflation

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QTC: Taiwan – strongest wage growth in 10 years

Like Japan, underlying wage and price dynamics in Taiwan really seem to be shifting. Data have already shown that the post-covid acceleration in wage growth is sticking. Today's numbers for June show that in Q2 as a whole, sequential growth in mfg wages was the strongest since 2012.

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QTC: China – rate cuts no longer help property

The link between property sentiment in the PBC's depositor survey and interest rates isn't as close as for other real estate indicators. But the takeaway is still the same: property isn't reacting to rate cuts in the way it used to, even with mortgage rates in Q2 falling to new record lows.

China – still the new normal

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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: Taiwan – strong TSMC sales

TSMC's sales rose to another record high in July. Set against that, Taiwan's July export data look rather soft. I still haven't found a good explanation for the gap. I wouldn't have thought it can be the fabs in Japan?

China – core CPI deflation again

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QTC: Taiwan – export growth struggling

Asia data is showing an industrial recovery that remains sluggish. Today's data for Taiwan, similar to Korea's earlier in July, shows export growth struggling to get into double digits. That's modest, when both economies should be the biggest beneficiaries of AI-related demand for tech hardware.

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QTC: Japan – solid Economy Watchers survey

The Economy Watchers survey for July has the same message as the PMI: at least before the market volatility of the last few days, Japan's cycle was in pretty good shape.

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China – imports more interesting than exports

July exports fell, but it is premature to call the start of a downturn. That's partly because of market share gains. These are solid, though not impressive enough to validate over-capacity. In terms of structure, the much bigger shift is in imports, which have completely over-turned pre-20 trends.

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QTC: China – another sign of softer exports

It doesn't make sense to read too much into a single monthly indicator, but the MoM fall in exports in July does follow weakness in the (presumed) exporter-heavy Caixin PMI. As exports have been the one bright spot in the economy, these shifts increase the sense of growing downside risks.

Japan – confident but not dogmatic

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QTC: Taiwan – inflation now low enough

Today's July data show the moderation of core inflation in Q2 has been sustained. If there's now a global slowdown, the central bank will likely stop worrying about prices. But if the export cycle proves to still have legs, more work likely needs to be done to cap the post-2020 step-up in inflation.

Japan – solid wage data

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QTC: China: S&P PMI better, but still no mojo

The better tone of the headline Caixin services PMI in July wasn't reflected in the commentary: "Instances of service providers raising selling prices.....were offset by others lowering selling prices to support sales.". The level of business confidence was "the second-lowest since March 2020".

Japan – taking stock

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QTC: Japan – strong services PMI

Whatever else might be true, the BOJ isn't changing policy at a time of cycle weakness. The full PMI confirmed the strength of the flash, with firm employment, "marked" inflation and robust business confidence. That was all true even though foreign demand contracted.

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QTC: China – building material prices fall even faster

It really is striking that while policymakers have been trying to stabilise the property market for months, construction price data show no let up in the pain. Indeed, if anything, through late July it looks to be getting worse.

Last week, next week

Korea – taking stock

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QTC: Korea – rebound in services inflation

Services inflation had already bottomed at above 2%, and now it looks to be trending up again. As a big component of domestically-generated inflation, a rise in services inflation will make it much more difficult for core and thus overall inflation to stay at the BOK's 2% target.

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QTC: Taiwan – PMIs still underwhelming

The industrial cycle still lacks some of the momentum that we have been expecting, with the manufacturing PMIs easing back in July. However, the services PMI continues to hold up, suggesting overall activity in Taiwan remains strong.

Japan – confident on services prices, less so on SME wages

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QTC: Korea – export growth can't get over 10%

It looks increasingly likely that Korean export growth has stalled. Exports grew by around 10% a year each month in the first half of 2024, and equities are pricing a similar rate of expansion in the second. That's not much when the domestic cycle remains weak.

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QTC: China – S&P/Caixin mfg PMI down too

After the August PMIs, there's less room to think the economy is continuing to muddle through. Until now, the weakness of the official mfg PMI has been offset by strength in the Caixin version. Today's fall closes that gap, suggesting that even sectoral bright spots are now dimming.