Key Asian economies have ‘reasonably strong’ start to 2018

SINGAPORE -- Asia-Pacific data at the start of 2018 is reasonably strong. Manufacturing sentiment looks solid, with high and modestly rising purchasing manager's indices (PMIs). Sentiment in the services segment also remains firm, says S&P Global Ratings in a report just published.

The early 2018 economic data in China showed solid growth. Manufacturing PMIs remained steady while non-manufacturing PMIs continued to rise, pointing to an ongoing economic rebalancing.
 
Credit showed the usual spike in January, but the year-over-year growth trend is clearly downward. Inflation remains contained, with upstream pressures easing owing to base effect, lower commodity prices, and policy action.
 
"Near-term growth risks in China remain modest. The key issue is the trajectory of the growth-credit path, and here we are watching whether the recent modest progress in slowing credit growth intensifies," said Paul Gruenwald, S&P Global Ratings' Chief Economist.
 
"The pick-up in global growth should give some policy space to push harder on reforms."
 
GDP growth for Japan in the final quarter of 2017 came in soft, but there were signs of strength in the data.
 
Private consumption and investment rebounded during the quarter. Net exports, government spending, and inventories weighed on growth, with inflation continuing to rise modestly despite a strengthening yen.
 
"We remain relatively upbeat about Japan's growth prospects despite a weak end to 2017," said Gruenwald.
 
"Domestic demand growth rebounded in the last quarter of 2017, and retail sales growth accelerated in December from the previous month. The reflation story continues with all inflation indicators moving up on a year-over-year basis."
 
In India, economic data continues to point to a consolidation of growth following the wobbles that accompanied the launch of the goods and services tax. The PMIs remain above 50, with services in particular showing strength.
The report says the synchronised global upturn should support growth, although India will benefit less than most countries due to its services-heavy export basket.
 
The report also noted that the U.S. fiscal stimulus plan presents some short-term upside risks to growth, while higher interest rates are a clear risk to the debt-heavy parts of Asia-Pacific.  www.standardandpoors.com (ATI).