HONG KONG: It has been noted that Asia’s industrial production and exports have run rock-steady growth paths for the past four years.
According to a research note from DBS, Asia-10 growth has averaged 6.3% for the past three years and we expect it will do so again in 2015 and 2016.
DBS noted that the major change in Asia of late has been inflation. After running at a steady pace for four odd years, it has fallen sharply since mid-2014.
India’s inflation has fallen to 5.4% YoY; a year ago it stood at 7.9%. Indonesia’s inflation has fallen to 6.3% from 7.7% a year ago. China’s has dropped to 1.4% from 2%. Malaysia’s to zero from 3.5%. In Taiwan, Singapore and Thailand, inflation is now negative.
It’s easy to say that falling inflation owes to the 50 percent drop in oil prices since July 2014. But it’s not all, or even mainly, about oil, said DBS. Core inflation, which excludes food and energy, has been falling for 3.5 years. It’s now down to 2.2%-2.5% YoY, half what it was in mid-2011.
In all Asia-10 countries, save for Hong Kong, Taiwan and China, core inflation is running 30%-40% below long-run average. So the fall in Asia’s inflation isn’t just about oil.
