Economic data points across Asia have been beating expectations. Similar to the wave of upside surprises we have had in the US, Asia has been experiencing its own. The result is that Goldman’s measure of improved Asian economic data points, “The Diffusion Index”, has risen strongly.
One interesting point is that “Asia Ex-Japan and Ex-China” has actually been surprising forecasters the most and outperforming even China in terms of improvement during this rebound. (Shown below)
This has been due to upside economic surprises particularly in India, Korea, and the ASEAN region, which combined, have a larger GDP (based on a purchasing parity) than Germany or Japan, and one that is approaching China in size. They’re also growing rapidly with less of the bubble-risk that China has. Thus in addition to China, and Latin America, investors shouldn’t overlook this mini-engine of global growth going strong. Add China to them and you have an economic unit about the same size as America.
Finally, as we have previously highlighted from a JP Morgan piece, American economic data has been beating forecasts quite a bit as well lately.
There are surely risks to the economy and it’s always prudent to be cautious. Yet bears need to square their view of an unimproved economy with the the global data we’re seeing. In the 21st century, we have more global growth engines than just America’s massive economy.
Goldman: With initial signals of recovery, all central banks across the region have now ended their monetary easing cycles and may start to consider “exit strategies” over the next year.
(Charts sourced via Goldman Sachs, “Asia Surprised Monthly Update”, 8 September 2009)