Strong activity in Q1, but trade risks loom at APAC region

SINGAPORE (S&P Global Ratings) March 20--Trade risks could cast a shadow

on strong economic activity in Asia-Pacific in the first quarter of 2018, said

S&P Global Ratings in a report published Monday, titled "APAC Economic

Snapshots--March 2018."

Economic activity remains strong on the consumption and investment fronts in China following the Chinese New Year. Credit expansion eased sharply in February, following the normal seasonal pattern. Consumer price inflation rose on food and base effects, and the producer price index-consumer price index wedge has almost disappeared.

China's trade surplus increased in February reflecting an across-the-board surge in exports. The authorities are closely watching trade policy developments in the U.S., although the impact of the announced steel and aluminum tariffs should be modest.

"Trade policy risks out of the U.S. have re-emerged in recent weeks, and look set to intensify as the globalists in the White House seem to have lost influence," said Paul Gruenwald, S&P Global Ratings' Chief Economist. "We would need to see resulting downward shifts in sentiment, spending, and investment before we alter our baseline forecasts."

In Japan, growth improved in the fourth quarter of 2017 to an annualized rate of 1.6 per cent, from 0.5 per cent in the government's initial release. This reflected stronger domestic demand despite a drop in real wage growth. The high-frequency indicators look mixed with retail sales momentum picking up but industrial production growth softening. Core inflation has been flat and the Bank of Japan has doused recent rate-hike rumors.

-rmc//