China's official purchasing managers' index
(PMI), which is mainly a measure of manufacturing activity in large state-owned
enterprises, rose slightly to 51.0 in June from 50.8 in May, a six-month high,
boosted by new orders and export orders, but expectations for future business
dropped slightly. A reading above 50 indicates an expansion in manufacturing
activity over the previous month, while a reading below indicates a contraction.
Meanwhile the HSBC bank sponsored index rose to 50.7 in June, from 49.4 in May
and the first time this year that it moved above 50. Elsewhere in Asia, there
were rises in June PMIs in Japan and India while manufacturing in South Korea
manufacturers signalled the first improvement in overall operating conditions
for six months in June. Output rose for the first time since January, and at a
moderate pace. Growth was supported by the strongest expansion of total new work
since March 2013, while new export orders rose for the second month running.
Increased volumes of new business led to the quickest depletion of stocks of
finished goods for nearly three years, while job shedding was the weakest in
After adjusting for seasonal factors, the HSBC PMI
- - a composite indicator designed to provide a single-figure snapshot of
operating conditions in the manufacturing economy - - posted at 50.7 in June, up
from 49.4 in May, and signalled the first improvement in business conditions
since last December. That said, the rate of improvement was only slight and
weaker than the historical average.
The improvement in the health of the sector partly
reflected the first expansion of total new business placed at Chinese
manufacturers for five months during June. Furthermore, it was the strongest
rate of new order growth in 15 months. Reports from panellists suggested that
improving market conditions boosted sales in the latest survey period. New
export business also rose in June, albeit at a marginal pace that was weaker
than May’s 49-month high.
Increased volumes of new work led to the first expansion
of output since January. The rate of growth was also the quickest since last
June data signalled renewed capacity pressures at Chinese
manufacturers, with backlogs of work rising for the first time in five months.
That said, the rate of increase was only slight. Anecdotal evidence suggested
that unfinished business rose due to increased amounts of new work.
Consequently, stocks of finished goods declined at a moderate pace that was the
fastest since September 2011. Staffing levels meanwhile declined for the eighth
successive month in June. However, the pace of reduction eased to a modest pace
that was the second-weakest in 2014 so far.
Purchasing activity in China’s manufacturing sector rose
again in June, amid reports of higher production requirements. The rate of
activity growth edged up to a modest pace that was the strongest in the year to
date. Average input costs increased for the first time since last December in
June. That said, the rate of inflation was moderate and much weaker than the
long-run series average.
Hongbin Qu, chief economist,
China & co-head of Asian Economic Research at HSBC said:
"The HSBC China Manufacturing PMI final
reading for June rebounded to 50.7, up from 49.4 in May, and relatively
unchanged from the flash reading. This confirms the trend of stronger demand and
faster de-stocking. The economy continues to show more signs of recovery, and
this momentum will likely continue over the next few months, supported by
stronger infrastructure investments. However there are still downside risks from
a slowdown in the property market, which will continue to put pressure on growth
in the second half of the year. We expect both fiscal and monetary policy to
remain accommodative until the recovery is sustained."
A recovery in the Japanese manufacturing sector occurred in June as output and
new orders rose for the first time in three months. Meanwhile, firms increased
their purchases of new inputs to cope with higher production requirements and
stocks of finished goods declined for the first time since January. Payroll
numbers remained in expansion in June, albeit at a slower pace than the previous
month. Input prices continued to rise but selling prices deteriorated for the
second month running.
The headline seasonally adjusted Markit/JMMA PMI posted at
51.5 in June, up from 49.9 in May. This signalled improved business conditions
for Japanese manufacturers for the first time in three months, and compared to
an earlier ‘flash’ reading of 51.1.
Manufacturing production in Japan grew for the first time
since March, with the rate of growth posting above the series average. Stronger
underlying demand reportedly led to the increase in output.
Similar to production, new business also expanded for the
first time in three months in June. The rate of expansion in orders was solid
and above the series average. Meanwhile, new export orders declined for the
third month running but the rate of contraction eased to a fractional pace.
India: Growth in the
Indian manufacturing economy was maintained in June. Greater domestic and
foreign demand led companies to increase production levels further. Buying
activity expanded at a faster rate, while employment continued to rise. Input
cost and output price inflation accelerated over the month, although in both
cases the rates of increase were below their respective long-run averages.
Adjusted for seasonal variations, the seasonally adjusted
HSBC PMI rose marginally from 51.4 in May to 51.5 in June. Operating
conditions improved for the eighth month in succession, although modestly.
Output expanded at the fastest pace since February, with
survey respondents indicating that growth reflected the signing of new
contracts. All three broad areas of the manufacturing sector registered higher
production volumes, led by consumer goods producers.
New orders increased for the eighth successive month in
June. The pace of expansion remained moderate. Panellists reported stronger
demand from both domestic and foreign clients. By sub-sector, the sharpest rise
was noted at consumer goods firms.
June data highlighted a marked and accelerated expansion
of new export orders received by Indian manufacturers. Having surpassed the
series average, the rate of growth was at a three-month high.
Amid evidence of new order growth and re-stocking efforts,
Indian manufacturers raised their quantity of purchases in June. Buying activity
increased for the eighth month in succession and at the fastest pace since March
Concurrently, pre-production stocks rose in June. That
said, the rate of accumulation was only slight and weaker than the long-run
series trend. Holdings of finished goods also expanded at a slight pace, albeit
one that was faster than in May. Higher post-production inventories were linked
by respondents to increased production levels.
For the ninth consecutive month, manufacturing employment
rose in June. However, the rate of job creation was marginal and slower than in
the prior month. Those panellists reporting higher payroll numbers attributed
this to the signing of new contracts. The overall increase in staffing levels
was centred on the consumer goods category.
Higher prices paid for metals, plastics, textiles, food
and energy led to a further increase in average purchase prices. The rate of
cost inflation was solid overall and the sharpest in three months.
Indian manufacturers passed on greater cost burdens to
clients, as highlighted by a rise in output prices. Charge inflation was at an
eight-month peak, but remained below the series average. Faster increases in
tariffs were signalled across the three monitored sub-categories.
South Korea: HSBC PMI
data complied by Markit continued to indicate a downturn in South Korea‟s
manufacturing sector in June. Output and new business fell further, with the
former registering the fastest rate of decline in the current three-month
sequence of deterioration. Backlogs and stocks of finished goods fell sharply
due to a reduction in the number of new orders received. Payroll numbers,
however, continued to grow in June. Downward pressure on costs remained, linked
to the appreciation of the won leading to lower imported raw material prices.
The HSBC South Korea PMI posted a reading of 48.4 in June,
which indicated a further deterioration in performance from May when the PMI
registered at 49.5. Moreover, the latest June PMI figure signalled the fastest
rate of worsening in business conditions since August 2013.
Output fell sharply in June, which a number of respondents
blamed on dampened consumer demand. The latest new business data indicated a
further fall in June. A number of survey participants blamed the latest decline
in new orders on an economic downturn. Alongside a weakening in domestic demand,
new business from abroad fell for the third month running in June, although the
pace of decline eased slightly and remained marginal.
Consequently, stocks of finished goods declined further,
extending the current period of deterioration to 17 months. Moreover, the pace
of reduction was the fastest recorded since September 2013. Many panellists
blamed the reduction in holdings of final goods on lower new orders received.
Despite the fall in output, employment growth was recorded
for the eighth month running in June. Some South Korean manufacturers commented
on changing their company structure, leading to higher payroll numbers. That
said, the rate of growth in payroll numbers remained marginal and below the long
run series average for the third month running.
Input prices continued to fall in June. Firms linked the
downward pressure on input prices to reductions in raw material prices.
Similarly, output prices declined in June which firms partly attributed to a
fall in imported raw material prices. The rate of reduction in selling prices,
however, was the slowest since December 2013, with only 5% of panellists
commenting on lower prices in comparison with the previous month.
Due to the reductions in production and incoming new
orders, the quantity of purchases registered a sharp fall in June, with over
one-fifth of panellists noting a decline in comparison with May. Consequently,
stocks of purchases were reduced further, with some firms attributing falls to
the release of existing stock.