Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Asia Economics Comment: Decoupling, still

Asia Economics Comment: Decoupling, still

Last week brought several painful reminders that stronger growth in the West isn't providing much of a lift to Asia. Over the coming days, expect the data to reinforce that message. Asian exports, including Japan's, have so far failed to respond convincingly to improving demand in the US and the EU. With consumption and investment looking a little tired in most markets, the expected pick-up in growth will be decidedly muted. Fortunately, stable interest rates and resilient capital flows will help keep things on an even keel for the time being. At least that's something.


Start with the recent flow of data. In Asia, there was more evidence of wobbly exports. Japan saw a sharp dip in shipments in March, down over 3% sa on the month in volume terms. Taiwan's new export orders, a useful leading indicator for the region, contracted by a similar amount. Meanwhile, new export orders as measured by HSBC's China flash manufacturing PMI dropped back below 50. In all, hardly signs that the regional trade cycle is firing up.


At first glance, that's puzzling. After all, last week brought yet more encouraging data for the US and Europe. For example, in the former, durable goods orders jumped impressively in March, something that should benefit Asian exports given their sensitivity to the US capital expenditure cycle (new orders in the US flash manufacturing PMI also rose). In the Eurozone, last week's flash PMIs all pointed to accelerating growth, while Germany's IFO index bounced as well.


What gives? A couple of things. First, as we have long argued, growth in the West appears to be less import intensive than in the past. This reflects to an extent a decline in Asian competitiveness, with wages soaring across the region in recent years, while remaining more or less unchanged in advanced countries. In addition, growth in the US and EU may have shifted away from import intensive sectors, such as housing construction (improving but from a rather depressed level). Second, Asian exporters are also suffering from a pull-back in demand among other emerging markets, including China, that supported trade since the Global Financial Crisis.


This week, there's plenty of data to keep an eye on that should broadly point in the same direction. In Asia, apart from the PMIs, Korea will release export data for April (always the first print of the month), with Thailand and Indonesia publishing numbers for March. Korea and Japan will also release industrial production for the month, with important clues about expectations among manufacturers. In the US, non-farm payrolls are expected to be robust (HSBC: 195k, consensus: 210k), with factory orders and consumer confidence also likely strong. In Europe, the European Commission surveys, Eurozone inflation, and the final PMI readings should broadly reinforce a relatively upbeat tone.


In short, a remarkable divergence in growth trends. Alas, it's decoupling of the wrong kind. As local demand decelerates across emerging Asia, a bounce in exports would have provided welcome relief. Fortunately, interest rates remain low and capital flows remarkably resilient. That should be enough to keep things ticking along for a while, but not enough boost growth to more customary levels.

Ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Half Empty: Fonterra's 2017 Opening Forecast Below Expectations

Fonterra Cooperative Group raised its forecast farmgate milk payout for next season by less than expected as the world's largest dairy exporter predicts lower prices will crimp production and supply will pick up. The New Zealand dollar fell. More>>

ALSO:

Pest Control: Mouse Blitz Team Leaves For Antipodes

The Million Dollar Mouse project to rid Antipodes Island of mice is underway with the departure of a rodent eradication team to the remote nature reserve and World Heritage Area. More>>

Gongs Got: Canon Media Awards & NZ Radio Awards Happen

Radio NZ: RNZ website The Wireless, which is co-funded by NZ On Air, was named best website, while Toby Manhire and Toby Morris won the best opinion general writing section for their weekly column on rnz.co.nz and Tess McClure won the best junior feature writer section. More>>

ALSO:

Pre-Budget: Debt Focus Risks Losing Opportunity To Stoke Economy

The Treasury is likely to upgrade its forecasts for economic growth in Budget 2016 next week but Finance Minister Bill English has already signalled that more of his focus is on debt repayment than on fiscal stimulus or tax cuts... More>>

ALSO:

Fulton Hogan's Heroes: Managing Director Nick Miller Resigns

Fulton Hogan managing director Nick Miller will leave the privately owned construction company after seven years in charge. The Dunedin-based company has kicked off a search for a replacement, and Miller will stay on at the helm until March next year, or until a successor has been appointed and a transition period completed. More>>

ALSO:

Gordon Campbell: On Electricity, Executions, And Bob Dylan

The Electricity Authority has unveiled the final version of its pricing plan for electricity transmission. This will change the way transmission prices (which comprise about 10% of the average power bill) are computed, and will add hundreds of dollars a year to power bills for many ordinary consumers. More>>

ALSO:

Half Empty: Fonterra NZ, Australia Milk Collection Drops In Season

Fonterra Cooperative Group says milk collection is down in New Zealand and Australia, its two largest markets, in the first 11 months of the season during a period of weak dairy prices. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news