Chart of the Day: Asian growth slides again - when is it going to end?

The truth is, it has already hit bottom six months ago, says DBS.

According to DBS, growth is slowing when measured in year-on-year terms, which is the way virtually all countries in Asia report it. From 11.3% YoY back at the start of 2010, growth fell to 8.5% by the end of that year, to 7.5% by 3Q11 and most recently to 6.9% in 4Q11.

Quarter-on-quarter growth rates however tell a different story. On that basis, growth is no longer slowing in Asia, it’s speeding up, says DBS.

Here’s more from DBS:

We reckon Asia-10 growth hit bottom in Q3, when sequential growth slowed to about 5.5% (QoQ, saar). China drove much of that slowing (as it inevitably will given it’s size– it accounts for 56% of Asia-10 GDP) with growth of 7.3% (QoQ, saar) in both Q2and Q3.

But Taiwan’s growth averaged a paltry 1% in Q2 and Q3, Singapore fared even worse, -0.6% on average. In the much larger India (15% of the Asia- 10) growth averaged but 3.4% in Q2 and Q3. By Q4, however, growth had picked up in China (8.5% vs 7.3% in Q3), Malaysia (6.1% vs 3.8%), Indonesia (8.7% vs 5.5%) and India (8% vs 2.5%).

For the Asia-10 overall, sequential growth accelerated significantly to 6.9% from 5.4% in Q3. As we’ll see below, that acceleration came on the back of a turn in industrial production and, on the demand side, of continued steady growth in domestic consumption.

As noted, acceleration on the margin didn’t prevent the on-year rate from falling, nor the perception that growth continues to slow either. But that’s precisely the point: most are watching the wrong statistic.

Folks are one quarter behind the curve now and they’ll be two quarters behind very soon. That’s because if growth accelerates further on the margin, as we fully expect, the on-year growth rate will still slip even further from where it is today.

By our calculations, if sequential growth accelerates to 8% (the Asia-10 long-run average), on-year growth will nevertheless decelerate to 6.6% YoY.

DBS comments: You can see the headlines now: “Growth slides again”. And you can hear the sighs now: “Where’s it going to end?’ And the answer will be: it ended 6 months ago! Asia will be back at long-run average (8%) but those who read the YoY numbers will see the turn 6-9 months after the fact.