Asia PMIs mixed in April - Westpac

According to Simon Murray, Research Analyst at Westpac, changes in Asian PMIs were mixed in April, with emerging Asia tending to be more positive as most of developed Asia continued to point to a cresting in world activity.

Key Quotes

“On the latter, particularly notable was South Korea’s moderation to a one year low. Against this, Japan recovered in April following a dip through February and March.”

“The Japanese PMI rose to 53.8 from 53.1 breaking two consecutive quarter’s of declines from a top of 54.8. The gain was driven by a 2.1pt lift in output with new orders up a lesser 0.8pts. However, new export orders expansion fell to a 20 month low. This could be related to a general reduction in demand across the Asian supply chain, but is probably driven more by the recent surge in the Yen - which has since eased back. The input and output prices sub-index also fell marginally, again emphasising the difficulty the BoJ faces in reaching their inflation target.”

“The Korean PMI fell further into contraction at 48.4 from 49.1, with weakness seen in both output and new orders. Malaysia similarly fell to 48.6, and the Taiwanese PMI also declined albeit from a higher starting base (April’s result of 54.8 is still above levels seen in Q3 2017). Interestingly, the employment sub-index jumped 2.3pts to 53.6, suggesting firms are more confident in the outlook.”

“PMIs in developing Asia were generally more positive in April.”

“The Indian PMI rose to 51.6 from 51.0 with increases seen in output and new orders. Firms are more confident with the employment sub-index bouncing back to 50.9 from 49.7. Another encouraging sign is the cooling in input price momentum, which fell back to 52.9 from 53.8. Official measures of inflation have eased back in the economy from a brief stint above target, but as the Rupee weakened and the Brent oil price continued its uptrend above $70, concerns are growing at the RBI about a resurgence in inflation. The possibility of cost-push inflation will linger as an ongoing risk, but some comfort can be seen in the PMI reporting less pressure from input costs.”

“The Indonesian PMI was also strong rising 0.9pts to a 22 month high of  51.6. The jump was driven by output and new orders, but mirroring this was a sharp decline in new exports reflecting reduced overseas demand. A key concern for Bank Indonesia has been the effect of the declining Rupiah on inflation and stability. Though April’s result is a positive number, firms appear more tentative with the employment sub-index falling 1.0pt to a neutral 50.0.”

“Strength was also seen in Vietnam and the Philippines. Thailand was softer.”