The monthly and quarterly data drop on activity in Asia’s biggest economies kicked off yesterday, with the tenor of the reports matching early releases for Japan and South Korea earlier in the week.
In fact it was more of the same for Japan with the release of the Bank of Japan’s quarterly survey of business sentiment (called the Tankan) showing a slide in planned spending (which can change over coming months), but no improvement in business confidence.
Inflation in South Korea fell to a 16 year low of 0.4% last month, while the country reported its largest ever trade surplus last month of $US8.4 billion as imports and exports fell.
In fact it looks like South Korea hit a pothole last month.
And in China, the two surveys of the country’s huge manufacturing sector showed an improvement (which surprised forecasters).
The final reading for the Chinese manufacturing sector from HSBC/Markit for March was 49.6, up from the preliminary reading of 49.2 last week.
Earlier yesterday, the official PMI survey for March rose to 50.1 from 49.9 in February.
The HSBC reading was a 3-month low.
The HSBC index is skewed towards small, private companies while the official focuses more on big, state-backed companies (and it’s seen as being a bit steadier).
But the reports show that while they were not as weak as forecast, China’s huge manufacturing sector remains trapped in a narrow band and is not showing any vibrancy – for that we can blame the continuing grip of deflation and less than stellar demand for their products from domestic customers and on export markets.
In Japan the Tankan survey showed little change in business confidence and if anything a small dip in the months ahead, which is not what the country’s government and central bank wants to see as they exhort industry to invest more, pay higher wages and try and drag the economy out of the continuing deflationary rut.
The headline index for big manufacturers’ sentiment was unchanged from three months earlier at plus 12 in March, less than a forecast 14 reading.
Big firms plan to cut capital expenditures by 1.2% in the new Japanese financial year which started yesterday. In the December Tankan the reading was a massive 8.7% increase!
In fact business spending plans are now lower than they were a year ago, on the eve of the tax rise on April 1, 2014.
While that can change in the months ahead as companies become more confident, the weak outlook for that index suggests it will take more than just a warm fuzzy feeling to get business to spend more.
(The tankan’s sentiment indexes are derived by subtracting the number of respondents who say conditions are poor from those who say they are good. A positive reading means optimists outnumber pessimists).
And Japanese car sales fell in march for and eighty month in a row.
Vehicle sales fell once again in Japan during March, marking the eighth straight month of declines. Total vehicle sales in Asia’s second largest economy dropped 13.1% year-on-year last month after falling more than 14% in the year to February. They were rose in July, when they were up 0.6%
In South Korea, inflation fell in March, while the country recorded its highest ever monthly trade surplus of $US8.4 billion, thanks to a 15% slide in the value of imports from March of last year (lower prices for oil and gas, coal, iron ore, etc).
While the market forecast a drop of 12.1% (after a 19.6% slide in February), the real concern was the fall of 4.6% (from last March) in exports as volumes fell.
Separately the monthly survey of the manufacturing sector from HSBC /Markit joined China in contraction with a reading of 49.2 (after growing in January and February).
And the 0.4% (year on year) reading for consumer prices in March was the lowest the CPI has been for 16 years. Prices were flat when compared to February, while core prices grew 2.1% year on year.
Yesterday’s data followed disappointing industrial output figures on Tuesday, which showed a 4.7% year-on-year drop, a sign the economic growth could fall closer to 3% than the 3.4% current official forecast.
