1. hpwatcher said...

Manufacturing growth slows in Asia


Chinese factories slowed production in June for the first time in fifteen months, while manufacturers in other major Asian countries eased the pace of growth in output, according to new data released on Thursday.

The combination of lower output in China and slower expansion in Japan, South Korea, India and Taiwan confirms that the region is seeing an easing from the growth surge that followed the global financial crisis.


The most striking change of pace came in China, where both the official and unofficial purchasing managers’ indices (PMI) showed that the pace of expansion in manufacturing had slowed markedly. The official Chinese PMI fell to 52.1 in June from 53.9 in May, while the unofficial but closely watched HSBC index fell to 50.4 from 52.7.

An index figure above 50 indicates an expansion of manufacturing activity while a figure below 50 indicates a contraction. The official Chinese reading was the lowest since February, but economists generally played down the deceleration reading.

“The moderation in the manufacturing PMI implies slower sequential growth in China’s manufacturing sector, partly due to the tightening measures taking effect. But fears about a hard landing are overplayed,” said Hongbin Qu, HSBC’s China chief economist.

However, China’s National Bureau of Statistics described the official numbers as “grim”, saying they reflected the impact of tighter government economic policies and a weakening of the global recovery.

The HSBC South Korea PMI fell to 53.3 for June from 54.6 in May, indicating the weakest pace of expansion since December 2009, but extending a series of positive monthly reports to 16 successive months.

Economists said the figures for Asia’s fourth-largest economy suggested that more normal growth was returning to South Korea’s manufacturing sector, with the volume of new export orders still expanding, although coming in at a slower pace.

Waiho Leong, economist at Barclays Capital in Singapore, pointed to a 32.4 per cent increase in South Korean exports in June from a year earlier as evidence that growth in Asia “may not be about to keel over just yet”.

HSBC’s Taiwan Manufacturing PMI fell for the third successive month to 53.8 in June, from 57.4 a month earlier. But it remained positive for a fifteenth successive month.

Frederic Neumann, co-head of Asia economic research at HSBC in Hong Kong, said new export orders were still growing at a “decent” pace.

“After surging over the first five months of the year, the growth of Taiwan’s economy is starting to cool. This, however, does not signal a hard landing,” said Mr Neumann.

In Japan, the Nomura/Japan Materials Management Association PMI fell to 53.9 from a four-year peak of 54.7 in June. The numbers, published on Wednesday, suggested that firm growth was continuing, and marked the twelfth succeessive month of expansion.

Minoru Nogimori, an economist at Nomura, said the continued high level of new export orders indicated that shipments would remain solid.

“While some have been concerned about the impact on the Japanese economy of financial market disruption triggered by the European fiscal troubles, so far that impact appears to have been small, and we expect the Japanese manufacturing sector to continue to improve for a while,” he said.

PMI figures for June are expected to be released later on Thursday in India and Australia.