>Growth accelerates across Asia (DANSKE MARKETS)

Asia has so far performed better than expected in 2010. In emerging Asia GDP growth in Q1 10 accelerated to 12.2% q/q AR from 8.0% q/q in the previous quarter. Even Japan continued to perform strongly with GDP expanding by a solid 4.9% q/q AR following a respectable 4.0% q/q AR growth seen in the previous quarter.

The solid performance in Asia continues to be driven by a strong recovery in industrial production. As seen in the chart, industrial production again accelerated in Asia in Q1 10, following some moderation in growth in Q4 10 on the back of the exceptionally strong growth in the early recovery phase. Manufacturers across Asia continue to adjust production to demand and inventory cuts have eased substantially. Hence, growth in industrial production has continued to improve despite some slowdown in export growth. For Asia as a whole, export growth in Q1 eased slightly to 8.2% q/q from 11.2% q/q in the previous quarter.

Growth in industrial production probably peaked in Q1 and consequently we expect Asian manufacturing PMIs to start decline slightly in coming months. OECD leading indicators suggest that growth in exports will continue to ease albeit remaining healthy. In addition the positive impact on industrial activity from the inventory cycle should be less in the coming quarters. However, this has not yet started increasing across Asia, suggesting that there will be still be a positive impact on growth from inventories in the coming quarters, but that it would be significantly less than in the previous quarters.

To read the full report: GROWTH IN ASIA