The usual avalanche of Asian data arrives with the end of the month.  Surprisingly, despite generating seven surprises and five shocks, there was little compelling to explore. 

China's CFLP PMIs for August were, frankly, a non-event, with manufacturing almost unchanged, and non-manufacturing up slightly. The details are, frankly, dull. 

India's 2Q GDP dropped 22.8%  yoy: utterly disastrous but also dictated above all by the mandated pandemic lockdown. 

Japan and S Korea reported industrial results for July, with Japan having the slightly better month (output up 8% mom and inventory/shipment down 8.9% mom), vs S Korea's manufacturing output +1.8% mom and inventory/turnover down 1.4% mom).  But Japan is starting a long way back, with output down 16.1% yoy vs S Korea down 2.4% yoy.  And both have a long way to go to deal with their still-worrying inventory disequilibria.   

Today has featured the EU's major monthly set of confidence indicators, aggregating to their growth-tracking Economic Sentiment index. It's recovery continues, but it's only partial - indeed, it's still 15.2% below pre-Covid levels. And that's the sort of frailty which confidence indexes around the world are showing, even though they (mostly) continue to improve. 

Just about the only place confidence has recovered beyond pre-Covid levels is in financial markets, with State Street's global investor confidence index now roughly 10% above pre-Covid levels. 

The second strand in today's bulletin is the continuing efforts being made to rebuild US inventories, after the huge inventory dump of the first half of the year.  Progress isn't easy, and in some cases, shortage of materials is now closing production lines.  What we're seeing in this part of the inventory cycle is combined supply and demand shocks.  

Today I focus on the Eurozone monetary data for July, trying to track the various flows between the ECB, Eurozone governments, and Eurozone banks. 

Sadly, this is an endeavour which is pretty tricky.  However, the bottom line is this: the ECB's balance sheet has grown much more rapidly than the absolutely rise in M3.  The ECB lends to the banks, who in turn lend on a multiple of that to governments, who return the favour by shoring up the liability side of the banks' balance sheets by taking out deposits and buying bank bonds. Meanwhile, it looks as if the private sector has been offloading longer-term bank liabilities rapidly. 

In the end, this is a belt-and-braces attempt by the ECB and Eurozone governments to shore up the liabilities side of banks' balance sheets during the pandemic.  And you've got to say -  so far, so good.  Eurozone monetary velocity is clearly dropping like a stone, but at least the banks are still standing. 

Three things surfaced from today's economic data:

1. The strength of US orders for durable goods and capital goods. This extends the run of surprisingly strong global capital goods sector numbers seen since mid-July.  Quite surprisingly, it seems that the capital goods sector is the first out of the blocks as far as post-Covid recovery is concerned. 

2. Hong Kong's July trade data was overall rather disappointing, but the relative strength of exports to China vs the relative weakness of imports from China suggests quite simply that China's domestic demand recovery is running ahead of recoveries in the rest of the world. HK's trade numbers can be seen as warehouse movements indicating the state of China relative to the rest of the world. 

3. S Korea posted improved survey results for manufacturers. But don't be fooled - even though they beat expectations, they're still not better than the worst moments of the pre-Covid world. 

Today was all about confidence indicators: 

In the US, the Conf Board's consumer confidence index slumped 7.5% mom to its lowest point since early 2014 - worse even than the lowest points of the first wave of coronavirus.  (But is the survey's pessimism more important than the extraordinary surge in new home sales - up 36.3% mom to the highest since December 2006?)

In addition, we had consumer confidence from S Korea (about half confidence recovered from Covid's worst); and Germany's August Ifo survey, which showed the business climate index almost fully recovered from Covid's travails. 

It is difficult to avoid the unexpectedly strong news coming out of Taiwan right now.  Last week we saw surprisingly strong export orders and a current account surplus boosted by a previously unseen surplus of services.  The week before it was strong wage growth that was popping up unexpectedly. 

Today, I focus on what's happening in Taiwan's money numbers. To put it briefly, broad money is surging for a second month, and not because bank lending is pushing it along.  In fact, the monthly rise in net deposits was probably the second-largest in Taiwan's history. 

What's driving it is a massive rise in capital inflows - foreign assets inflow are up 3-4x over the last couple of months, and whilst the central bank and government are combining to try and sterilize the inflows, they have only achieved so much.

If Hong Kong's 'good & friendly China' role were to start transferring over to Taipei, you'd see increased services exports, large scale capital inflows, a build-up of deposits in Taiwan's banking system, and an outperforming economy. 

Which sort of echoes what the data is telling us right now.  

One cannot entirely avoid the start of Markit's PMIs for August. Their shorthand message: Japan still bad; Eurozone recovery relapsing; UK and US surging. 

Elsewhere, the data merely added more evidence for strands already evident: in the US existing home sales jumped 24.7% mom, and in the UK retail sales volumes rose 3.6% mom. In both cases, these no longer look like the 'inevitable' rebounds from very depressed levels - rather they look like actual expansions. 

Today is all about Taiwan, because:

a) July's export orders jumped 12.4% yoy, which was exceptionally strong, and amplifies yesterday's comments about the recovery in Northeast Asia's exports; and

b) Taiwan's 2Q balance of payments included two interesting developments: a services surplus! and very strong capital inflows.  Is Taiwan going to inherit Hong Kong's mantle as the commercially friendly face of China to the world? 

Two trend stories from Asia today, prompted by data released today.

First, Japan's July trade data rounds off the set for NE Asia, and the results from the region show an unexpectedly sharp rebound in export volumes, even though the yoy comparisons still tend to be negative.  So it's easy to miss the rebound that is underway - but which of course also finds echo in recovering G3 import appetite. 

Second, although Hong Kong's unemployment rate unexpectedly dipped 0.1pp to 6.1%, the larger story, and the larger concern, is the continuing and post-97 unprecedented fall in the territory's labour force. 

Another slow and sleepy mid-August day, enlivened only slightly by the US's strong housing starts/building permits numbers, and Indonesia's trade and current account improvements. 

Of those, the improvement in Indonesia's external balances is the most important. Almost certainly, Indonesia's private sector is now generating a savings surplus, which is protecting Indonesia's bond markets and fx rate.  Indonesia is extremely fortunate to have someone like Sri Mulyani Indrawait i/c the country's finances!