Manufacturing slides in China; Weak across Asia
Manufacturing PMI surveys produced by Markit, a London-based index firm, showed a sharp fall in China in July but with the exception of Japan, there was weakness or contraction in several countries across Asia.
Chinese manufacturers saw the quickest deterioration in operating conditions for over six years in August, according to latest business survey data. Total new orders and new export business both declined at sharper rates than in July, and contributed to the most marked contraction of output since November 2011. Lower production requirements prompted companies to reduce their purchasing activity at the fastest rate since March 2009, while weaker client demand led to the first rise in stocks of finished goods in six months. Meanwhile, softer demand conditions contributed to marked falls in both input costs and output charges in August.
Adjusted for seasonal factors, the Purchasing Managers’ Index (PMI) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – registered at 47.3 in August, up slightly from the earlier flash reading of 47.1, but down from 47.8 in July. The PMI has now posted below the neutral 50.0 value for six successive months, with the latest deterioration in operating conditions the sharpest since March 2009.
August data signalled a second successive monthly fall in total new work placed at Chinese goods producers, with the rate of contraction quickening to a 17-month record. Markit reports that panellists generally suggested that deteriorating market conditions had weakened client demand both at home and abroad during August. Furthermore, new export business declined at the steepest rate in just over two years. Softer client demand led manufacturers to scale back their production again in August, with the latest reduction in output the quickest seen since November 2011.
Latest survey data pointed to a stronger improvement in operating conditions at Japanese manufacturers. New order growth accelerated to a seven-month high, while both production and job creation also increased. In contrast, new export orders rose at a slower pace, with reports of reduced trade volumes with China dampening international demand. Meanwhile, prices charged rose at a slight rate, but input prices remained unchanged, having risen in the previous month.
The headline Nikkei Japan Manufacturing PMI is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. Any figure greater than 50.0 indicates overall improvement of sector operating conditions. The headline PMI posted at 51.7 in August, up from 51.2 in July, thereby signalling a stronger rate of improvement in operating conditions in the Japanese manufacturing sector. Moreover, the latest reading was the second-highest of 2015 so far.
Markit said the overall improvement in the Japanese manufacturing sector was supported by a sharp increase in new orders, with growth accelerating to the fastest since January. According to respondents, successful gains in new clients and advertising campaigns had led to the latest expansion. All three sectors registered growth in new work, with investment goods producers reporting the sharpest increase.
Although Indian manufacturing business conditions continued to improve in August, latest data pointed to weaker rates of expansion for both output and new orders. On the price front, input costs decreased for the first time in six months and, subsequently, firms lowered their selling prices. Elsewhere, post-production inventories contracted at the sharpest pace since data were first collected in April 2005.
At 52.3 in August, down from July’s six-month high of 52.7, the seasonally adjusted Nikkei India Manufacturing PMI pointed to a further, although weaker, improvement in the health of the sector. Underpinning the downward movement in the headline index were softer increases in output, new orders and stocks of purchases, whereas employment levels stagnated over the month. Suppliers’ delivery times, the remaining subcomponent of the PMI, were broadly unchanged. Boosted by sustained demand growth, manufacturing production across India rose further in August.
Markit said that although still solid, the rate of expansion eased since July and was below the long-run series average. New order growth also moderated in August, reflecting weaker improvements in both domestic and foreign demand. Amid evidence of increased production requirements and efforts to replenish stocks, Indian manufacturers raised their buying levels in August. Purchasing activity grew at a sharp rate that was the quickest in 2015 so far.
Latest survey data pointed to a general worsening in operating conditions in the South Korean manufacturing sector. Output declined in August, with the rate of contraction little-changed from July’s sharp pace (the second-fastest rate since October 2012). New orders declined at a slightly slower pace, as did new export orders. Subsequently, employment levels contracted for the fifth straight month, albeit at a weaker rate. Meanwhile, both input and output prices declined further.
The headline Nikkei South Korea Manufacturing PMI posted at 47.9 in August, little changed from 47.6 in July (the second-lowest reading since August 2013), thereby indicating a solid deterioration in operating conditions at South Korean manufacturers. "The headline PMI has now registered below the 50.0 no-change mark for the sixth month running, marking the longest sequence of declines since November 2012. Underpinning worsening manufacturing conditions was a further solid decline in production in August. According to panellists, unstable economic conditions, reduced sales and the MERS flu outbreak all contributed to the latest contraction," Markit said.
August data highlighted an eleventh consecutive monthly deterioration in business conditions across Indonesia. Incoming new work continued to drop, with companies lowering production and staffing levels accordingly. Markit said that in all cases rates of contraction softened since the prior month. Cost inflationary pressures remained intense, reflecting the weaker rupiah. Adjusted for seasonal factors, the Nikkei Indonesia Manufacturing PMI rose from 47.3 in July to 48.4 in August.
The latest reading was in contraction territory for the eleventh consecutive month, but was consistent with a slower deterioration in manufacturers’ business conditions. Leading the headline index to rise were softer declines in output, new orders, employment and stocks of purchases, whereas vendor performance deteriorated to broadly the same extent as seen in July. Goods producers in Indonesia signalled lower output in August, as has been the case on a monthly basis since last October. Falling levels of incoming new work were blamed for the latest drop in production. Nonetheless, the pace of reduction in output was moderate and the softest since January.
Weaker growth of output and new orders was recorded at Vietnamese manufacturing firms in August amid some reports of easing client demand. Falling prices in world markets contributed to a sharp reduction in input costs. This led to a faster decline in output prices, while some firms reported having lowered charges in response to competitive pressures from Chinese firms. This was also mentioned as a factor behind a drop in new export orders.
The headline Nikkei Vietnam Manufacturing PMI posted 51.3 in August, down from 52.6 in July and signalling the weakest improvement in business conditions since March. "That said, the health of the sector has now strengthened on a monthly basis throughout the past two years. Manufacturing output increased at the slowest pace in ten months amid some reports of weakening client demand. Growth of new business also eased in August, but remained solid as panellists indicated having secured new work from both new and existing clients," Markit said.
Operating conditions in the Malaysian manufacturing sector deteriorated further in August. New orders contracted at the fastest rate since September 2012, leading to further sharp falls in both production and purchasing activity. Subsequently, employment decreased for the third straight month, albeit at a weaker rate. Cost pressures persisted, as input prices rose at the quickest rate since November 2013, consequently leading to higher chargers.
The headline Nikkei Malaysia Manufacturing PMI at 47.2, down from 47.7 in July, the headline PMI signalled the strongest deterioration in operating conditions at Malaysian manufacturers in nearly three years. This was reflected in all five components, with production, new orders and stocks of purchases recording sharper rates of decline. New orders at Malaysian goods producers contracted for the sixth month in a row.
"Moreover, the rate of decline was the second-sharpest in the series history. Poor demand, unfavourable exchange rates and challenging economic conditions were cited as the main factors behind the latest fall. Subsequently, a sharp contraction in manufacturing production was recorded, with the rate of decline little-changed from June, when output contracted at the fastest rate in 32-months," Markit said.
China prepares for victory parade on 3 Sept.
Photo above, taken on 26 Aug 26, 2015 shows the flower decoration on the Tian'anmen Square in Beijing. "In celebration of the 70th anniversary of the victory of Counter-Japanese Aggression War, flowers have been placed on Tian'anmen Square and Chang'an Avenue, which will be in place till late October." Photo: Xinhua
Xinhua, the official news agency reported in July that the Communist Party of China (CPC) had played an essential role in the Anti-Japanese War, while the Kuomintang (KMT) Party "played an important role," a Chinese scholar had said.
Many of the nationalist Chinese allied with the Kuomintang government escaped to the island of Taiwan in 1949 and their role in the defeat of Japan has only been recognised by Beijing in recent times.
"The CPC-KMT united front exerted an "extremely important" role in the victory of the War of the Chinese People's Resistance Against Japanese Aggression (1937-1945), said Li Zhongjie, former deputy director of the Party history research office under the CPC Central Committee."
A military parade will be held in Beijing on 3 Sept.