The macroeconomic picture in Asia-Pacific looks broadly positive heading into the 2017 home stretch. GDP growth has been decent if unspectacular, while inflation remains at or below target in most economies. The external environment has improved somewhat, and market volatility is low. Geopolitical risks remain elevated and very much in the headlines (and difficult to quantify) but economic risks look less pressing, at least in the near term.
The growth picture in the region looks fairly solid. Among the largest economies, China and Japan show better-than-expected growth momentum (although they have differing risk profiles). China's growth was 6.9% in the first half of the year--comfortably above the 6.5% official target. The credit metrics have improved, reflecting a public investment boost and higher producer prices, but credit quality is still a worry. Japan posted a strong second quarter of 2.5% annualized growth, driven by rising confidence and spending, although wages and prices remain stubbornly sticky. Australia's second quarter was strong as well, on the back of robust consumption and net exports. India suffered its second straight disappointing quarter of growth of about 6% as uncertainties around the launch of the much-awaited goods and services tax crimped spending.