• Asia-pacific’s macroeconomic environment remains intact, albeit at the cost of trade and capital risks: S&P ratings

    Source: FxWire Pro - Commentary / 23 May 2018 12:42:01   America/New_York

    The favorable macroeconomic environment in Asia-Pacific remains intact, although risks relating to capital flows and trade have increased, according to the latest report titled "APAC Economic Snapshots--May 2018", published by S&P Global Ratings.

    Cautious optimism on trade has faded somewhat in recent weeks. U.S.-China trade tensions have heated up again as a U.S. delegation's visit to Beijing yielded no tangible results and the Chinese Vice Premier's visit to Washington looks destined for similar results. It is uncertain whether the U.S. objectives are related to trade only or the broader relationship, including investment and intellectual property.

    Capital outflow risks and currency pressures have also increased recently. Several Asia-Pacific currencies continue to decline against the U.S. dollar, driven by higher U.S. interest rates and higher-than-expected economic growth in the U.S. The first round of economic data out of China for the second quarter points to steady growth, the report added.

    PMIs remain above 50 across the board, with non-manufacturing and services leading the way. Credit growth is rising again, and inflation remains low. Exports rebounded and the trade balance reverted to its usual surplus in April. Growth remains consumer-led and supported by non-manufacturing and services activity.

    "The solid economic data give us little reason to change our outlook of steady growth in China at present. However, the credit data show that progress on deleveraging remains modest. We expect any tightening of financial conditions to be gradual," said Paul Gruenwald, Chief Economist, S&P Global Ratings.

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