Asia Session Highlights

Japanese Machine Orders surprisingly rose in February, by 1.4%, after the dour month of economic data led forecasters to call for a decline in the figure of -7.0%. February’s figure is the strongest of such since September, when orders grew by 5.5% in the single month. Generally, such a rise in a leading indicator like this would insinuate that the overall economic picture may be starting to improve as the demand for capital intensive goods begins to rise. Such a positive outlook may not necessarily be the rational thing to feel. Much of the underlying activity in the performance of the figure came from an 86.7% rise in the orders for textile machinery. Looking back at history, we’ve noticed that February is an unusually impressive month in terms of the demand for textile machinery; last February this portion of the metric rose 448%. One explanation for such increases during the month is that Japanese clothing manufacturers begin to prepare and produce for the warmer weather 2-3 months prior to the actual realization of the warmth. Demand for non-ferrous metals were the second strongest in the month. Such metals include copper, which had the largest 3-month price rise since 1985 in 09Q1. In essence, much of the rise in the demand for these non-ferrous metals has been price-based and not volume-based. As such, we cannot infer that the surprise move by machine orders is indicative of a sooner-than-expected recovery in the Japanese economy.

Australian labor data performed much weaker than that which had been anticipated by the median forecast of economists surveyed. Indeed, the unemployment rate spiked to a 6-year high of 5.7% in March after expectations called for a hike of only 0.2 percentage points from 5.2%. March also saw 34.7K overall jobs lost with 40K full-time ones being eliminated. Over the last 6 months, the number of these full-time slots has plummeted by 115.2K; a substantial portion considering a labor force of only 11 million. The figures come just 8 days after Deputy Prime Minister, then acting as Prime Minister while Kevin Rudd was in Britain for the G20 conference, Julia Gillard, stated that the rate of unemployed would likely favor the 7.0% mark in the coming months.

Inflation expectations among Australians notched up from March’s decade low by 0.2 percentage points, to 2.4% in April. Of the laborers surveyed in the four occupational classes, only the clerks and salespersons category expected inflation to rise. This may be due to the notion that those working in this category will be those who benefit the least from Australia’s previous two stimulus packages. The dual-plans, which may become a trio in May, seek to give cash grants primarily to families. Since salespersons are more likely to be younger and hence less likely to have a family, they may feel that inflation will disproportionately affect them in greater numbers.