Asia July industries – a mixed bag as battle with inflation continues

Nurluqman Suratman

02-Aug-2022

SINGAPORE (ICIS)–Asia’s manufacturing sector in July presented a mixed performance, with major economies in the northeast showing a marked slowdown in activity, as the region continues to contend with high input costs and weak demand.

For China, both the official and non-official manufacturing purchasing managers’ indices (PMI) for July indicated continued weakness in the world’s second-biggest economy.

The country’s official manufacturing PMI in July unexpectedly slumped to 49.0, falling back into contraction mode, from 50.3 in June, while the Caixin manufacturing PMI eased to 50.4 from 51.7 in June but stayed in expansionary territory.

A PMI reading above 50 indicates expansion, while a lower number denotes contraction.

“The pullback in the PMIs suggest that there are still major growth concerns and the economic outlook remains challenging,” Singapore-based UOB Global Economics & Markets Research said in a note.

“The resurgence in COVID-19 infections (in cities including Shenzhen), turmoil in the domestic property market, high global inflation and weakening global demand outlook are all dampening China’s recovery in the second half of 2022,” it said.

For Japan, au Jibun Bank’s manufacturing PMI fell to a 10-month low of 52.1 in July from 52.7 in June as both output and new orders fell into contraction territory.

“Foreign sales were reportedly hindered by weakened demand in key export markets across the Asia-Pacific region, particularly China and South Korea,” au Jibun Bank said.

For South Korea, the manufacturing PMI fell to 49.8 in July, from 51.3 in June, marking the first decline since September 2021, according to a private survey by S&P Global Market Intelligence.

“Higher prices for inputs including fuel, metals and semiconductors meant that the disruption was broad-based across the manufacturing sector,” said S&P Global economist Usamah Bhatti said.

“Positive sentiment remained marked in July, although headwinds from ongoing inflationary issues increasingly weighed on optimism which fell to the lowest since last October,” Bhatti said.

“Some business also reported concerns regarding the prolonged fallout from the Russia-Ukraine war, as well as the impact of zero-COVID policies in China,” Bhatti added.

For southeast Asia, the headline ASEAN manufacturing PMI by S&P Global rose to 52.5 in July, up from 52.0 in June, led by Singapore, Thailand and Vietnam.

Singapore led the rankings in July, with a PMI hitting a new high of 60.0, the highest reading ever recorded in ASEAN.

At the same time, manufacturing slowdowns were recorded in the Philippines and Vietnam, with July PMI readings at the weakest in six months and 10 months, respectively.

“Price pressures remain persistently high, despite easing marginally on the month. In response, central banks around the region are likely to exercise tighter monetary policies,” S&P Global economist Maryam Baluch said.

“This could potentially impact growth momentum and demand in the coming months, which continues to find its bearing as the COVID-19 shocks subside,” Baluch added.

Focus article by Nurluqman Suratman

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