International | Apr 10 2013
– China housing to gain traction
– Japan to advance (for now) on new policies
– India going nowhere fast
– More, minor, US improvement
By Andrew Nelson
It’s been a busy few months in Europe, in Asia and in many of the lands between, but newsflow, not dataflow has been holding most of the attention. Cyprus bank taxes, new monetary policy in Japan and the prospect of another Korean War are just a few things that saw dataflow take a bit of a back seat.
The March round of purchasing manager's indices (PMI) was able to command some attention, while Beijing’s latest efforts to tame the nation’s housing market also garnered interest. Also, monetary policy is now being actively managed in the three largest regional economies, but while Japan is attempting some very aggressive easing, India is doing so reluctantly, and China is starting to head in the other direction.
As far as China goes, the latest re-jigging of the nation’s housing policy is starting to take shape. Cities have been asked to submit plans for controlling prices, with some of the larger areas already having responded with haste. Current measures in play include outright restrictions on investor purchases by single person households in Beijing, lower loan-to-value ratios (LVR) and higher mortgage rates for second homes and also no third homes in Shanghai.
Economists from Westpac have seen this all before, although this time around, the latest downswing has featured a unique overlay in the form of the social housing build-out. This is in line with the assumed goal of developing an economy more in balance in terms of income distribution, investment and consumption. This is being done by providing some equality in matters of access to credit, education, health, employment and housing.
Looking at Japan, Westpac notes new Bank of Japan head Kuroda’s first meeting at the helm was a resounding success. Market expectations were high, but he beat them by shifting the operating target of policy to the size of the balance sheet, while increasing the term to maturity and scale of asset purchases. Lastly, the message outlining the Bank’s commitment to unconventional policy and its resolve to conquer deflation was issued in crystal clarity.
India has been a bit of a disappointment, Westpac noting that since the return of capital flow in the September quarter, all the economy has managed to do is come up with some sort of zig-zag monthly data flow pattern, which quite confusingly alternates between promise one month and letdown the next. It’s better than a straight run downhill, but it’s also harder to watch.
As far as emerging Asia goes, March data gave us a first look at the underlying state of demand post the New Year holiday period. Westpac points out that the best data available at the moment are the manufacturing PMIs, which were quite promisingly all above 50 in March. The problem with this seemingly good news is that the best read was only 52.0. Thus while production is inarguably expanding, it’s just not moving at a pace that will be enough to materially raise capacity utilisation rates.
Recent data from Asia’s most crucial trading partner, the US, have been at least decent of late and are still pointing to a rebound in GDP growth in the March quarter. Westpac thinks it’ll touch around 2% annualised. Unfortunately, the bank thinks this could prove to be the high point for the year given fiscal drag remains a major headwind for consumption, while the employment situation is not as healthy as the bulls insist. Just look at Friday’s numbers.
This adds one more question mark to the already cluttered looking Asia recovery story.
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