JAPAN DATA: Tankan Beats Expectations, Capex Outlook Firms
Japan's Q4 Tankan survey was mostly above market forecasts. The large manufacturing index at 14, versus 13 forecast (which was also the prior outcome). The outlook was at 13, versus 12 forecast and 14 prior. For large non-manufacturers we were at 33 and the outlook at 28, both in line with consensus. All industry capex was 11.3%, versus 10% forecast and 10.6% prior.
- For smaller firms, we were better than expected. On the manufacturing side, we edged up to 1 (versus a -1 forecast), while the outlook was flat versus a -1 forecast. For non-manufacturing we rose to 16 from 14 prior and 12 forecast. This was the highest read since the early 1990s. The outlook was 8, against an 11 forecast for these firms.
- Broadly the improvement or elevated nature of conditions for larger firms suggests a supportive GDP growth. The chart below plots the current index levels for large firms (manufacturers in white, non in green) against y/y GDP growth.
Fig 1: Tankan Large Firm Index Levels Versus Japan Real GDP Y/Y
Source: MNI - Market News/Bloomberg
- The second chart is the Tankan capex reading against Japan capex in y/y terms. Again the Tankan result is presenting a solid outlook base.
- The reading for smaller firms is also likely to please the authorities/encourage the BOJ around the resiliency of the growth backdrop.
- Still, the results in aggregate, may not be enough to prompt a shift at the Dec meeting, with the policy outcome announced next Thursday. Recent media highlights have suggested the BoJ sees little risk in waiting until 2025 for further policy adjustments.
Fig 2: Tankan Capex Versus Japan Capex Y/Y
Source: MNI - Market News/Bloomberg
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JAPAN DATA: PPI Y/Y Back Above 3%, Should Support Headline CPI
Japan's October PPI was stronger than expected, up 0.2%m/m, versus a flat forecast. The prior month was also revised higher to a 0.3% gain (initially reported as flat). In y/y terms, we rose 3.4%, against a 2.9% forecast and 3.1% prior (initially reported as a 2.8% gain).
- The chart below plots the PPI y/y against headline CPI y/y for Japan. Whilst there is a clear levels difference between the two series, the directional correlation remains reasonable. Today's PPI result, all else equal, should be supportive of the CPI backdrop.
- Looking at the detail, agriculture +26%y/y, non-ferrous metals +14.6%y/y, along with oil and coal +4.5% and textiles +4.6%y/y were the strongest contributors to the PPI y/y rise. Only three sub categories saw negative y/y prints.
Fig 1: Japan PPI (White Line) & CPI Y/Y
Source: MNI - Market News/Bloomberg
AUSSIE BONDS: ACGB May-30 Auction Result
The AOFM sells A$800mn of the 2.50% 21 May 2030 bond, #TB155:
- Average Yield (%): 4.3317 (prev. 3.8354)
- High Yield (%): 4.3325 (prev. 3.8375)
- Bid/Cover: 3.6688x (prev. 3.0187x)
- Amount Allotted at Highest Accepted Yield as Percentage of Amount Bid at that Yield (%): 95.7 (prev. 33.8)
- Bidders 40 (prev. 41), successful 13 (prev. 17), allocated in full 3 (prev. 7)
AUSTRALIA: SEEK Advertised Salaries Moderating, WPI Coming Up
Today the Q3 wage price index (WPI) prints and is forecast to rise 0.9% q/q and 3.6% y/y, down from 4.1% in Q2, consistent with the RBA’s 3.4% forecast for Q4. SEEK advertised salaries are in line with this moderation in wage pressures with annual growth moderating over this year. With productivity growth remaining low at 0.4% y/y in Q2 and the RBA revising down its expectations for 2024 and 2025, wage growth needs to moderate a bit further for it to be consistent with the inflation target.
- SEEK advertised salaries (ASI) rose 0.2% m/m in October to be up 3.6% y/y down from 3.8% and the lowest since the pandemic-impacted August 2021. It is above trimmed mean inflation implying that real wages are rising again.
- Advertised government jobs are rising around 4% y/y due to recent enterprise agreements.
- ASI rose 1% q/q in Q3 but averaged 4% y/y growth down from the Q2 average of 4.3% and Q1’s 4.4%.
- The WPI usually prints close to expectations but some of the details can hold additional information, such as the average pay increase and the proportion of rises at the upper end.
Australia SEEK advertised salaries %
