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Asia-Pacific cities in Tomorrow's World: What is consensus telling us?

Asia-Pacific cities in Tomorrow

This week in our Asia-Pacific cities research series, we discuss consensus forecasts across the Asia-Pacific region.

Across our markets, it is evident that improving global cyclical growth momentum is feeding into better economic prospects. Consensus has been marking up growth forecasts for regional markets, and following the Q2 2017 real GDP releases, it is likely further improvements to the forecasts are expected to come. While the US economy continues to stay in good shape, somewhat stalling at current growth levels, improving domestic demand in Asia-Pacific is now driving the rotation in global growth towards the region.

Looking ahead to the outlook in the latter half of 2017, it is reasonable to expect some levelling off in growth from the outperformance in the first half of 2017 and only marginal improvements in consensus expectations to growth (with two or three quarters of actual growth outcomes out of the way, it is easier to project the full-year outlook).

One anomaly to the better outlook across the region is Australia, as consensus continues to mark down 2017's growth expectations from the less-than-stellar first quarter outcome. However, we should expect upside growth revisions, especially as the Q2 2017 GDP release will likely show a bounce back towards the 2.5% annual pace. Australia remains one of the most attractive and healthy economies globally, backed by favourable demographics and resilient internal demand conditions.

In summary, improving growth conditions will help to mitigate some of the downside risks from tightening financial conditions (and indirectly, asset prices) in some of our markets over the short term. However, as more central banks start to taper over the medium term, the dislocation in pricing between prime core versus secondary assets is likely to become more apparent. Therefore, we believe it makes sense to focus on core investments.

Fig.1: Asia-Pacific growth is revised higher, boost from China and Japan

Source: Oxford Economics, 2017

 

Fig.2: Singapore - improving outlook

Source: Oxford Economics, 2017

 

Fig.3: Japan - surprise upside

 

Source: Oxford Economics, 2017

 

Fig.4: China - healthy slowdown

 

Source: Oxford Economics, 2017

 

Fig.5: Australia - lower but sturdy

 

Source: Oxford Economics, 2017

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