GDP growth in Asia to ease in 2011 to a decent 7.2%

What the numbers say: Three out of the six Asian economies that have reported 2Q GDP registered sequential contraction in growth. They are Hong Kong, Singapore and Taiwan, which are some of the most open economies in Asia. The only comfort is China’s tronger-than-expected 2Q11 GDP, which eases concern of a hard landing for now.

What they mean: GDP is the broadest measure of economic activity. It is strongly correlated with the profit cycle and provides important clues about inflation and the direction of policy. Strong GDP often suggests policy will tighten; weak GDP implies a policy bias for pro-growth.

12-month outlook: Leading indicators suggest that Asia has recently hit a soft patch; but the soft patch is likely to prove temporary. As we see no hard landing in China or the global economy, we continue to expect Asia ex Japan growth to ease in 2011, but to a still decent 7.2% (from 9.1% in 2010).