Deutsche Bank-Asia Macro Strategy Notes A framework for tracking growth

T2se3r0Ot6kwoPaT2se3r0Ot6kwoPaDistributed on: 11/06/2025 08:32:10 GMTDistributed on: 11/06/2025 08:32:10 GMT11 June 2025We lay out our framework for tracking growth on a high frequency basis across Asia – China, India, Indonesia, South Korea, Malaysia, Philippines, Singapore, Thailand and Taiwan – using two separate methodologies.1. We track real economy data – such as retail & car sales, IP, exports volumes, etc. – to develop a real economy indicator of growth, which is coincident to GDP.2. We track the sources of funding available for various economic activities – such as wages, loan growth, government spending – to develop a monetary indicator of growth, which has leading properties.Real economy indicatorUsing real economy demand data to build a coincident indicator is a sound approach, but we must contend with the limitation that not every economic sector has a reasonable or timely monthly indicator available, particularly in the investments space.We have chosen indicators that satisfy two criteria: (1) improving overall goodness of fit while covering as many economic sectors as possible; and (2) being available in a timely manner. The latter makes us avoid 'usual suspects' in some cases, in favor of data that is available in a more timely fashion. We also add an error-correction parameter to our models. This utilizes the realization that whatever we are “missing” from our higher-frequency tracking is very likely autocorrelated.Monetary indicatorThe rationale for using monetary sources is that if we can count the money available for economic activities, we can usually get a good read of actual eventual spending.nAs this is a more fundamental approach, it has the advantage of not missing sectoral coverage.nMoreover, money received or raised is usually not deployed immediately, thereby giving us a leading indicator for growth.To build this framework it is crucial to understand the lead time from when money is available/disbursed to when it is eventually spent. This differs between economies – and in our exercise we have calibrated individually for each economy.Vaninder Singh, CFAMacro Strategist+65-6423 8947Deutsche Bank AG/SingaporeIMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS.Deutsche BankResearch Asia Fixed Income Asia Macro Strategy Notes Date A framework for tracking growth11 June 2025Asia Macro Strategy NotesPage 2Deutsche Bank AG/SingaporeWhile our theoretical exercise does hold “on-average”, in practice shocks can cause realized demand to deviate from predicted outcomes as economic actors change behavior in real time – even though money to engage in the purchase/production/investment is still available. In such instances, deviation between predicted and actual outcomes itself, we believe, has information value.We have regressed the indicators described below – after accou