Asia Morning Bites

There was only limited action yesterday in the G-7 macro space. US Conference Board consumer confidence actually held up reasonably given recent rises in gasoline prices, and the present situation index actually beat expectations. However, perhaps the prospect of higher rates is beginning to take a toll, and the forward-looking index fell to its lowest since early 2014.

On the calendar today, the US ADP employment survey will provide an appetizer ahead of Friday’s March non-farm payrolls release. And in Germany, we get preliminary March inflation figures, where the headline inflation number will likely jump from 5.5% to a little under 7%YoY. These figures have barely begun to price in the impact of the war in Ukraine, so there is a good chance they go still higher in time.

China: The Shanghai lockdown seems only to be impacting GDP slightly. The 50% rotation lockdown has already limited damage to economic activity. Financial institutions, ports and big factories are operating in a closed-loop mode, which means that their activities will not be substantially affected by this lockdown. Smaller factories and catering will be affected the most. The government has announced relief measures for them. Export delivery could be delayed if positive cases are found in Shanghai's port workers. But that should only affect port operations for about 4 days. After that, lockdowns should be lifted. There are also relief measures for SMEs for rent and tax exemptions. As a result, our forecasts for China’s 1Q22 GDP are only revised slightly lower to 2.28%YoY from 2.5%YoY.

Japan: February retail sales fell -0.8% MoM, the third consecutive monthly decline, and worse than the market consensus of -0.3%. This is mostly due to the latest surge in Omicron cases, as operation hours of restaurants and other services were shortened. The weak monthly activity data supports our view of Japan’s growth contraction for this quarter.