Asia: PMIs recorded positive results - Westpac

Simon Murray, Research Analyst at Westpac explains that PMIs recorded positive results across the three countries in Asia they focus on which includes India, Japan and Indonesia.

Key Quotes

“Japan steadied, with broad global economic strength aiding the upswing. After experiencing a short-term disruption associated with the GST’s implementation, India recovered in August to be back in expansionary territory. Indonesia also rebounded strongly in the month, leaving the PMI just above its average, consistent with a steady expansion.”

“The outcomes for India and Indonesia are the first readings following cuts to their respective benchmark interest rates. Both nations are currently seeing slower credit growth, but the positive tone of the PMIs suggests policy may gain traction and spur economic activity.”

“Having eased from an elevated level in May, the Japanese PMI steadied at 52.2 in August. This is an encouraging result, particularly given the recent Q2 GDP report suggests momentum in manufacturing is spilling over to domestic consumption. In August, the output index lifted 1.1ppts to be 0.7ppts above its 5-year average. New orders are similarly solid. New export orders had softened in recent months, but they bounced back in August.”

“India’s PMI rose 3.4pts to 51.2, with output and new orders recovering 5.9pts and 5.3pts respectively following the temporary GST shock. In the lead up to the GST’s introduction, Q2 GDP fell to a disappointing 5.7%yr pace, underpinned by a significant slowing in manufacturing. The normalisation of the PMI readings suggests firms have adjusted to the new system and that the economy will improve through the latter half of 2017.”

“The PMI in Indonesia also bounced back to 50.7 from 46.3 following a multimonth deceleration. August’s gains of around 3.5-4.0pts were seen across output, new orders and exports, pushing these sub-indices above 50. The ASEAN PMI also returned to expansionary levels, with reports of stronger external and domestic demand fuelling a rebound in Malaysia and Singapore.”

“Employment indices in each nation mirrored the movement in the headline PMIs, consistent with anecdotes of positive expectations. Input and output price inflation was fairly stable in Japan and Indonesia. However, India saw a slight dip in the input price index, suggesting a marginal disinflationary effect from the GST overall, though price trends vary by material.”