Eco Analysis - Disappointing data across Asia: CH trade, AU home loans, JP in recession (K. Baader, W. Yao, K. Katahira)

Eco Analysis - Disappointing data across Asia: CH trade, AU home loans, JP in recession (K. Baader, W. Yao, K. Katahira)

■ Disappointing China's trade data reflected structural weakness in both external and domestic demand.

Contrary to the activity data released over the weekend, China's trade growth in November disappointed, with exports growing 2.9%yoy (Cons. 9%, SG 7%, Previous 11.9%) and imports flat yoy (Cons. 2%, SG 0%, Previous 2.4%). As a result of weak exports, the trade surplus also came in smaller than expected at USD19.6bn (Cons. & SG, USD26.8bn), down from USD32bn in October.

By destination, exports weakened across the board. Demand from the Europe Union deteriorated the most and fell 18%yoy in November, the sharpest decline since August 2009. Export growth to the US dropped substantially as well from +9%yoy to -2.6%yoy, the worst reading since November 2009. These two regions together accounted for nearly 4ppt out of the 9ppt decline in the headline. Shipments to Asia neighbours also weakened by various degrees. Exports to Korea and Japan contracted, while ASEAN economies held up relatively better.

Imports have missed expectations for six consecutive months. China's commodity demand in yoy volume terms retreated further, despite weaker bases last year and reflation in commodity prices. The still high inventory levels have slowed the pace of restocking and outweighed the positive impact of the domestic demand recovery so far. We think this will remain an issue for imports for some time ahead.

The latest export figures serve as a reminder of the persistent nature of developed economies' problems, while import data appear to be another reflection of China's excess investment during the previous cycle. We expect limited upside for both exports and imports in coming months, and there is very little policymakers can do about it, except to contain the yuan appreciation.

■ Australia home loans well below expectations

Home loans to owner-occupiers were a lot weaker in October than generally expected, but we interpret this as just a short-term correction after a very strong run in the preceding two months. The number of loans extended to owner-occupiers grew just 0.1% mom in October, well below median expectations (3.0%, SG -0.2%), although the September gain was revised up to 1.1% from 0.9%. Loans for the purchase of existing homes - which make up the bulk of loans - slipped 0.1% mom after strong gains in August/September (+3.1%). Loans for the construction of new homes were also down slightly, the third successive decline. However, loans for the purchase of new homes continued their strong run (+4.2% mom).

While loans extended to owner-occupiers were weak - down 0.2% mom in value terms - lending to housing investors continued to rise, up 5.5% mom after 8.8% in September. All in all, the data do not derail expectations of a gradual strengthening in Australia's housing market.

■ Japan already in recession

Japan's revised Q3 GDP data hardly changed from the first preliminary data, with GDP contracting by 0.9% qoq, or at an annualised rate of 3.5%. Private consumption was slightly revised upward from -0.5%qoq to -0.4% qoq. Private non-residential investment was also revised up from -3.2% qoq to -3.0% qoq. But exports of goods and services were revised down from -5.0% qoq to -5.1% qoq while public investment growth was slashed from 4.0% qoq to 1.5% qoq.

As the consensus was expecting a small upward revision in the second preliminary release, the result was slightly disappointing. However, what is more noteworthy is that Q2 GDP was revised down from +0.1% qoq to 0.0% qoq (revised quarterly annualised rate at -0.1%). As a result, Japan has now suffered from negative GDP growth for two consecutive quarters - which means that Japan is now officially in recession since Q2.

Although our basic economic view remains that the domestic economy will moderately pick up as global economic conditions improve early next year, today's result will surely put extra pressure on the new cabinet (after the 16 December election) and the BoJ to implement more stimulus through fiscal and monetary policies.

See Disclosures.