May’s purchasing manager indices (PMIs) show sentiment has reached record levels in the US and UK while also surging in the Eurozone. The first chart below shows composite PMIs - for both manufacturing and services - hit 68.7 in the US, 62.9 in the UK and 57.1 in the Eurozone. A print above 50.0 shows firms expect orders to rise.
Source: Bank of Singapore, Bloomberg
In contrast, China’s dipped to 53.8 on minor virus outbreaks and Japan’s fell to 48.8 as further lockdowns threaten the Tokyo Olympics. Similarly, the second chart shows new lockdowns are affecting regional Asia’s developed economies with manufacturing PMI declining to 50.7 in Singapore, 53.7 in South Korea and 62.0 in Taiwan while only increasing to 52.5 in May for Hong Kong’s economy as a whole.
Source: Bank of Singapore, Bloomberg
For other Asian economies the hit has been worse with manufacturing PMI sliding to 47.8 in Thailand and 51.3 in Malaysia and composite PMI plunging in India to 48.1 as the last chart shows.
Source: Bank of Singapore, Bloomberg
But Asia’s PMI data also show signs of resilience. First, strong global demand for manufacturing exports is keeping business confidence in solid expansionary territory in China and South Korea and near record highs in Taiwan despite its fresh virus outbreak. Second, demand for commodities led to Indonesia’s PMI rising to 55.4 in May. Third, the current weakness in PMIs is far less than last year as firms and households adapt to new lockdowns. We thus expect activity to be held back for one quarter only, enabling Asia’s growth to rebound in the second half of 2021.Disclaimer applicable to recommendation
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