Not all Asian manufacturers are benefiting from the global economic recovery

ChinaFotoPress/Getty Images

The global manufacturing industry is looking better than at any point in recent years.

The JP Morgan-IHS Markit composite PMI rose 0.5 points to 54.0 in November, leaving it at the highest level since early 2011, led by strong performances from the Eurozone and US.

However, as seen in the heat map below from HSBC, after a wobble in October, it looks like Asia’s manufacturing sector is also starting to heat up with every nation reporting an improvement in activity levels in November.

It shows individual headline PMI readings — a measure of current activity levels — along with measures on new orders, a lead indicator on potential activity levels in the future.

Source: HSBC

As a reminder, a reading above 50 indicates that activity levels improved from a month earlier. The distance away from 50 measures the speed of the improvement.

Essentially, the higher the number, the stronger the improvement.

HSBC has colour-coded each individual nations performance.

A dark red colouring indicates that activity levels improved at a faster pace than a month earlier while a light red colouring reveals activity levels improved at a slower pace than the previous month. A grey colouring — of which there were none in November — indicates that activity levels deteriorated over the month.

There was plenty of dark red colouring for headline PMIs in November, something that Frederic Neumann, Co-head of Asian Economics Research at HSBC, described as a “not too shabby” result.

“After the October wobble, things appear back on track in Asia. Well, at least judging from the latest crop of PMIs,” he said in a note released on Tuesday.

“China is chugging along, India bounced, and Japan is on fire. Overall, growth seems to be holding up better into year-end than initially feared.”

While a strong result that suggests activity is picking up across thew region as part of a synchronised global upswing, Neumann says that investors shouldn’t get too carried away with the result, pointing out that most developing nation’s are still underperforming compared to their developed peers.

“There‚Äôs a common theme here,” he says.

“Advanced manufacturers have been riding high for a while, whether in East or West. Trouble is, the current industrial uptick is bypassing parts of emerging Asia like much of ASEAN.

“Advanced machinery and high-tech gear is currently in great demand, other stuff less so.”

Underlining that last point, Neumann says much of the improvement in developing markets is being driven by domestic demand, rather than that from abroad.

“The lift is coming less from the external side though: new export orders were mixed, while domestic activity ticked up for the most part,” Neumann says.

That result suggests external demand for basic manufactured goods is still a little soft, trailing in the wake of high-end manufactured goods.

That probably explains why manufacturers in developed economies are seeing a faster improvement in activity levels than those in other nations.

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