Asia manufacturing sector deteriorates in August – PMIs

Nurluqman Suratman

01-Sep-2015

Asian PMIs generally weaker in August

(recasts paragraph 16)

SINGAPORE (ICIS)–Asia’s manufacturing conditions deteriorated in August as effects from the economic slowdown in China and sputtering exports growth continued to weigh on production levels, a series of purchasing managers’ indices in the region showed on Tuesday.

In China, the key market for most petrochemical products in the region, the official purchasing managers’ index for August stood at 49.7, down from 50.0 in July, signalling weakening growth momentum in the country’s giant manufacturing sector. The August reading is the lowest level seen in three years.

A reading below 50 signals a contraction.

Additionally, Caixin’s China Composite PMI – which covers both manufacturing and services – fell to 48.8 in August from 50.2 in July.

Meanwhile, Caixin’s final August PMI for China, which gives higher weightage to smaller businesses as compared to the official PMI survey, slipped to 47.3 from July’s reading of 47.8.

Petrochemical market sources told ICIS that the contraction in the PMI readings were partly because of the shutdowns and cuts in run rates at several production facilities in North China in August, including Beijing, Tianjin and Hebei.

The shutdowns and rate cuts were part of Chinese government’s measures to ensure clean air ahead of a massive 3 September military parade commemorating the end of World War II.

Chinese media group Caixin said that overall new orders and new export orders in China both declined at sharper rates than in July, while lower production requirements prompted companies to reduce their purchasing activity at the fastest rate since March 2009.

Furthermore, Chinese manufacturing companies reduced their workforce numbers for the twenty-second month in a row in August, according to Caixin.

“Macroeconomic regulations and controls must continue and fresh reform measures must be introduced. Fine-tuning should go hand in hand with speedier implementation of structural reform in order to release the full potential of growth and lead the market to confidence,” said He Fan, the chief economist at Caixin Insight Group.

The slowdown in China has weighed heavily on regional export-led economies and their manufacturing sectors.

South Korea’s exports plunged by 14.7% year on year in August, its heaviest drop since August 2009, the country’s trade ministry said on Tuesday. Exports account for about half of the South Korean economy.

The country’s trade surplus fell to $4.35bn from $7.72bn in July, with shipments to China, the US and Europe all contracting.

South Korea’s manufacturing conditions tracked the contraction in exports, with the Nikkei manufacturing PMI for the country slipping to 47.9 in August from 47.6 in July, which points to “a general worsening in operating conditions”.

“Panellists mentioned a reduction in sales volumes with both domestic and international clients,” said Amy Brownbill, an economist at Markit which compiles the Nikkei PMI survey.

Elsewhere in the region, PMI readings by by Nikkei and Markit for Indonesia, Malaysia and Taiwan were below 50 in August, indicating a contraction in manufacturing activities. The PMI readings for India, Vietnam and Japan, on the other hand, continued to indicate expansion. (please see table below)

Nikkei/Markit Manufacturing PMIs

Aug-15

Jul-15

 

India

52.3

52.7

Indonesia

48.4

47.3

Malaysia

47.2

47.7

Vietnam

51.3

52.6

Taiwan

46.1

47.1

South Korea

47.9

47.6

Japan

51.7

51.2

 

 

 

 

China’s Official PMI

49.7

50

Caixin/Markit Final Manufacturing PMI

47.3

47.8

 

 

 

 

Denotes Contraction

Denotes Expansion

 


The Nikkei Japan manufacturing PMI for August rose to 51.7 in August, up from 51.2 in August, while its seasonally-adjusted PMI for India slipped to 52.3 from the six-month high reading of 52.7 in July.

Although manufacturing business conditions continued to improve in August, the latest data pointed to weaker rates of expansion for both output and new orders, Nikkei said.

“Growth of Indian manufacturing production waned in August on the back of softer improvements in both domestic and foreign demand,” said Pollyanna De Lima, an economist at Markit.

“A sharp increase in buying levels coupled with a record drop in stocks of finished goods, however, indicates that output growth will likely rebound in coming months,” De Lima added.

With additional reporting by Viola Pan

READ MORE

Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?