Asia’s manufacturing sector, with the exception of Japan, began the second half of the year as it ended the first – deep in contraction.
The chart below shows the manufacturing PMI readings for China, Japan, South Korea, Taiwan and Indonesia – some of the largest manufacturing nations globally.
It’s not a pretty picture:
China, the largest manufacturing nation globally, saw activity contract at the fastest pace seen in two years. Perhaps more worrying than the headline figure, lead indicators such as new orders and purchases of raw materials declined sharply.
Perhaps reflective of the weakness seen in China’s manufacturing sector, gauges for South Korea, Taiwan and Indonesia all held below the 50 level that separates expansion and contraction as well.
While there was some reasonable news from Japan – the Nikkei-Markit PMI gauge came in at 51.0 for July – activity is only expanding modestly, and below the level first reported in the flash PMI report late last month.
So what do these readings, collectively, say about economic growth around the globe at present? Certainly they do not reflect strength, nor do they suggest activity will accelerate in the months ahead. Indeed, with activity continuing to contract, it suggests that the outlook for growth in Asia, and as a consequence the globe, will remain incredibly subdued.
Unless we see some impressive manufacturing PMI reports from the likes of the US and Germany in the months ahead – other global manufacturing heavyweights – global growth forecasts from the likes of the World Bank, IMF and Asian development bank may, as they have been continuously in recent years, be downgraded yet again.