What the latest PMIs mean for Asia: HSBC

Headline readings improved a little in Asia and the US, but pulled back in Europe

June 03, 2014 3:13 IST | India Infoline News Service
Headline PMIs broadly improved across the region, even hitting a record high in Indonesia. HSBC's China PMIs showed expanding order books, both foreign and domestic, although the headline reading is still below the waterline. India ticked up as well, with improving sentiment likely to lift activity further in the coming months. Japan, too, following its tax hike stumble in April, looks like it is regaining balance. Korea, by contrast, continues to wobble, with new export orders down for a second month in a row, mostly due to weak shipments to China. A thaw, but hardly the stuff of soaring growth.
Let's kick things off with our first heatmap. Headline readings improved a little in Asia and the US, but pulled back in Europe. The HSBC China PMI improved again last month, and almost stuck its head above water (the final reading was down from the flash release of 49.7, however). Encouragingly, the forward looking indicators, like new orders, rose even more, suggesting that the "fine-tuning" measures are starting to gain traction.
There's an odd diversion between Taiwan and Korea, with the former up and the latter down. These two economies have been reliable bellwethers for the global industrial cycle in the past, being highly exposed to electronics and trade. It's difficult to interpret the latest data, therefore. We think the weakness in China has much to do with Korea's relatively lacklustre performance of late (Taiwan may be benefitting more from transhipments to the West). The gradual improvement in the China PMIs should thus provide a lift to Korea, too, in the coming months.

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