In APAC, trade emerges as a major headwind: S&P

March 1, 2019

SINGAPORE -- The cyclical slowdown in Asia-Pacific trade currently stems from cooling demand growth across the major economies, S&P Global Ratings said in a report published today. The key reason for the trade slowdown has been decelerating import demand from major economies as growth moderates back toward trend, the report says.

"Disentangling the effects of trade tension is difficult, but they may be starting to have an impact as investment growth weakens in the region's trade-dependent economies," said Shaun Roache, S&P Global Ratings' Asia-Pacific chief economist.  
 "Sentiment from U.S-China talks has improved but whether the two sides are achieving progress on the structural issues remains far from clear," he said.
 "Even if there is progress, agreeing on a monitoring mechanism covering issues such as intellectual property protection will be tough."
 There is little change in the path of domestic economic activity in China as growth continues to slow gradually, the report says. Policy easing in China appears to be gaining traction based on the pick-up in credit in January.
 "Financial conditions are now moderately positive, which, if sustained, would be consistent with some levelling off in growth by mid-2019.
 "For now, policy easing does not appear to be enough to fully offset ongoing moderation across other growth drivers, including real estate and manufacturing investment.
 Roache said: "While moderate easing is likely to continue, substantial easing is unlikely unless labour market conditions deteriorate.
 "For the Asia-Pacific region, trade remains the key risk. The threat of tighter global financial conditions has eased for now.
 "In Japan, buoyant domestic demand is offsetting the drag from trade (but) the housing downturn in Australia shows few signs of stabilising, clouding the outlook.
"The policy stance in India has tilted toward growth amid an uneven recovery." (ATI).