20 April 2018
China’s residential property market is growing again

China's growing middle class continues to drive housing demand, but we believe restrictive policies are (still) working to avoid a bubble burst

Surprisingly strong growth in 1Q18

China's property development sector is well known to be under government's restrictive mortgage and administrative measures, especially the residential property market. By this logic, investment in the industry should remain controlled. 

But 10.4% year on year growth of real estate investment in March is certainly a stronger than expected number for the market. The last time fixed asset investment in real estate grew at this speed was in February 2015. Growth in real estate investment was only 7.0% in 2017.

Interestingly, restrictive measures haven't deterred property developers experiencing good sales, which has driven them to invest more in the sector.

Asia week ahead: Trade threat? Not yet

The evidence of any impact of a trade war on Asia’s GDP growth has been scant so far, while firmer exports support expectations of even stronger growth 

No evidence of trade hit to Asia's growth so far

We think the global trade war has displaced geopolitics as the main risk to Asia’s GDP growth coming into 2018. Evidence of any impact of a trade war on growth at least in the first quarter of the year has been scant, though the war was only triggered in early March when President Trump announced hefty tariffs on steel and aluminium.

China and Singapore’s GDP growth came in on the stronger side in the first quarter. We expect GDP releases from Korea and Taiwan next week to reinforce the message, with firmer exports growth leading us to forecast firmer GDP growth for both economies.

Australia:  Distinctly unimpressive jobs data

We weren't really expecting this, but the latest Australian data could indicate a soft-patch

The labour market is supposed to lag the rest of the economy...

If the labour market lagged the rest of the economy, as it usually does, then Australian labour data should continue to be picking up. But the March labour data were distinctly unimpressive and have us worried that this may be reflected in other demand sensitive areas of the economy...retail sales, business investment, confidence etc. 

The figures are, as ever, a complicated combination of full-time and part-time jobs. In March, full-time job falls were more than offset by part-time jobs, though a full-time equivalent series we have created shows employment lower than it was in January. Downward revisions have further weakened the picture painted by these data. 

Moreover, the only bright spot in the data, the fall in the unemployment rate, seems to owe as much to a drop in labour participation rate than to anything positive. Such a fall is usually driven by falling optimism or a declining reward for working...not very positive in any case. 

But as mentioned, the labour market should follow the rest of the economy, and purchasing manager indices, on a composite basis are positive, though have fallen recently for manufacturing. This might explain some of the full-time / part-time split, as part-time jobs are more likely in services. Wages are also generally poorer in the service industry, so that may weigh on the Reserve Bank, although they show few signs of any tightening bias currently. We have a tentative 4Q18 rate hike pencilled in, but have the eraser ready to hand in case we need to shift it back. 

Reading time around 3 minutes

Good MornING Asia - 20 April 2018

The evidence of any impact of a trade war on Asia’s GDP growth has been scant so far, while firmer exports support expectations of even stronger growth 

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