Asia manufacturing PMIs show some weak spots but keep signaling growth
Summary
Asia’s latest factory activity data showed some loss of momentum midway through the third quarter, but a broad continuation of growth in output and orders.Asia’s latest factory activity data showed some loss of momentum midway through the third quarter, but a broad continuation of growth in output and orders.
Views among manufacturers on the sector’s outlook were mixed amid uneven price and demand developments through the region, though many were cautiously upbeat.
S&P Global’s manufacturing purchasing managers index readings for Japan and South Korea signaled improvement in August, while those for India, Thailand, Taiwan and Malaysia indicated expansions in manufacturing, though at a slower pace.
The China Caixin PMI returned to growth, in contrast with China’s official PMI that pointed to a contraction in activity in August.
The outperformance of the Caixin PMI, which is compiled by S&P Global, may be due in part to its heavier weighing for private-sector, export-oriented firms, Maybank economist Erica Tay said.
“The worsening official figure speaks to the greater weight of heavy industrial firms, whose prospects are dragged down by the real-estate sector—the epicenter of China’s economic downdraft," she added.
Japan’s manufacturing economy meanwhile moved closer to stabilization amid a renewed increase in output. While the growth was modest, it was the highest since May 2022, the au Jibun Bank PMI compiled by S&P showed.
In South Korea, the PMI for manufacturing output growth hit a 40-month high in August, with the data pointing to stronger new orders. Another positive takeaway was a softening in inflationary pressures, S&P Global Market Intelligence economist Usamah Bhatti said.
“An improved economic outlook and the production of newly launched products meant that confidence in the year-ahead outlook strengthened in August and reached a three-month high," he added.
In Taiwan, the indexes for output and new orders both rose in August to softer degrees. Demand growth weakened, though mostly from domestic sources as new export sales jumped, said Paul Smith, economics director at S&P Global Market Intelligence.
“Firms nonetheless still signaled some concern over the global economic outlook, a factor that was instrumental in pushing down broader sentiment to its lowest level of the year so far," he said.
Indonesia was the outlier, with PMI data suggesting its manufacturing downturn worsened, characterized by the steepest falls in new orders and output for three years.
Businesses unsurprisingly made staff cuts, but “many were keen to note these were temporary in nature," Smith said, likely reflecting “some confidence that operating conditions will improve."
