S&P Global Ratings indicates mixed finish for APAC region in 2016

The 2016 macro story is finishing on a mixed note with China expected to hit its growth target and activity in Japan picking up, S&P Global Ratings said in a report published yesterday, titled ‘Asia-Pacific Economic Snapshots--December 2016’.

 «Across the Asia-Pacific region, output indicators look stronger and the post-U.S. election currency sell-off continues,» said S&P Global Ratings› chief economist for Asia-Pacific Paul Gruenwald and added that “Australia hit what looks to be a temporary rough patch in the third quarter as growth turned negative”. 

China’s growth story looks quite solid as 2016 ends, with the rate of expansion squarely in the 6.5 percent to 7 percent official target range, and the Purchasing Managers Indices look good as well, S&P said.

 «The action has shifted to prices, where Producer Price Index inflation has not only turned positive after four years of decline, but has now passed Consumer Price Index inflation. The currency looks exciting again as well, with capital controls and reserve draw downs cushioning depreciation pressures, at least for now,» Gruenwald added.

 On the downside, India›s ‘own goal’ currency swap initiative has put a crimp on that cash-dependent economy. The government’s well-intentioned--but poorly thought through--demonetization program has dominated the news.

 Cash shortages, particularly in the rural areas, are driving down the pace of economic activity, and S&P lowered its GDP growth forecast for India by 1 percentage point in the fiscal year ending March 2017.

“Japan may finally be getting some good luck in the form of Donald Trump,” Gruenwald said, and added “U.S. growth and demand look likely to pick up, while the yen is steadily weakening. Its growth momentum looks good.”

Japan’s domestic bond yields have risen and  China, the regional rival, looks like it might be in for a rough patch with Trump, according to S&P.

 Although Japan’s third-quarter growth was revised lower to 1.3 percent from 2.2 percent on a seasonally adjusted annual basis, its previous quarters were revised higher.