Bloomberg reports that China’s official PMI has confirmed the weakness apparent in the Flash PMI last week:
China’s manufacturing contracted for the first time since February 2009 as the property market cooled and Europe’s crisis cut export demand, a survey showed.
The Purchasing Managers’ Index fell to 49.0 in November from 50.4 in October, the China Federation of Logistics and Purchasing said in a statement today. The median estimate in a Bloomberg News survey of 18 economists was 49.8. A level above 50 indicates expansion.
…The manufacturing index compiled by the logistics federation and National Bureau of Statistics is based on a survey of purchasing managers in more than 820 companies in 20 industries.
A gauge of new orders contracted for the first time since January 2009 and the output index expanded at the slowest pace since the same month, today’s survey showed. New export orders fell below 50 for a second straight month.
The last part is in stark contrast to the HSBC Flash PMI, which showed a bounce in export orders. I cannot explain the discrepancy, but I expect the current flush of growth in the US to pass as Europe deteriorates. I also expect, therefore, that the export components of the two PMIs to realign at a lower juncture before too long.
But China’s contracting manufacturing sector is only one of those struggling in North Asia. Today saw the release of the poor reports across the region. The Taiwan PMI came in at:
43.9 in November, up fractionally from 43.7 in October. The latest reading pointed to a further marked deterioration in business conditions.
New orders received by manufacturers in Taiwan fell for a sixth successive month in November. Despite easing slightly since October, the rate of decline remained sharp. Panellists commented that both domestic and export orders had decreased in the month due to worsening economic conditions. The rate at which new work intakes from overseas fell was marked and broadly unchanged since October.
The rate of decline slowing is something but we can’t say the same in South Korea:
Business conditions in the South Korean manufacturing sector worsened during November, and at a solid rate. This was highlighted by the HSBC South Korea Manufacturing PMI® posting 47.1 in November, down from October’s reading of 48.0. The latest deterioration was the fourth in as many months, and the sharpest in that period.
South Korean manufacturers reported a further decrease in new orders received during November. Moreover, the rate of decline accelerated. New business received from export markets also fell at a faster pace. Overall, panellists commented that weaker economic conditions had led to a reduction in demand.
Nor, for that matter, Japan, from two days ago:
Japanese manufacturers reported a deterioration in operating conditions during November. Output
decreased at the fastest rate in seven months, as new business continued to decline. Despite this, the
pace of employment growth was the highest since March. Meanwhile, the rate of input cost inflation eased to a 13-month low, and output charges fell further.
At 49.1 in November, down from 50.6 in October, the Markit/JMMA Purchasing Managers’ Index™ (PMI™) signalled a renewed deterioration in manufacturing sector operating conditions. In addition, the latest index reading was the lowest in seven months. Manufacturing production in Japan fell during November, with the pace of reduction the sharpest in seven months. Where a decline in output was recorded, this was linked by panellists to falling new business. There were also reports that supply chain disruptions emanating from flooding in Thailand had contributed to the overall reduction.
Demand for Japanese manufactured products continued to weaken, with incoming new business falling for the third successive month during November. Additionally, new export orders fell at a solid rate. Panellists linked the latest reduction in new export orders to weak demand from emerging Asia, with China mentioned in particular, and persistent yen strength. Companies also mentioned the Thailand floods.
None of the indices is falling off a cliff exactly but the growth engine of the world is clearly sputtering. Europe will prove an irresistible force to the downside if it hits these already weak manufacturing sectors without a much bigger boost to growth than that delivered last night by monetary authorities around the world. China is going to have to cut some more and soon.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
