• Global manufacturing activity shows signs of stabilizing at a moderate pace: The global manufacturing PMI came in at a 23-month low of 52.0 in Nov 18, unchanged from Oct 18. However, new export orders declined for the third straight month.
• The US continues to maintain a lead over Japan and the Eurozone: The US ISM manufacturing index leaped to 59.3 in Nov 18, from 57.7 in Oct 18. Export orders remained steady. The Eurozone’s manufacturing PMI contracted further to 51.8 in Nov 18, from 52.0 in Oct 18. Japan’s manufacturing PMI fell to 52.2 in Nov 18, from 52.9 in Oct 18.
• Moribund conditions in East Asia: South Korea’s PMI fell sharply to 48.6 in Nov 18, down from 51.0 in Oct 18. In addition, new export sales fell at the fastest rate in over five years. Taiwan’s PMI continued to languish in negative territory at 48.7 in Nov 18, up slightly from 48.4 in Oct 18. New export sales extended its decline – at a solid pace – from Oct 18.
• China barely ekes out an expansion: China’s official NBS manufacturing PMI dipped to 50.0 in Nov 18, down from 50.2 in Oct 18, and new export orders declined for the sixth consecutive month. The Caixin manufacturing PMI, which is a better barometer for China’s private sector, edged up slightly to 50.2 in Nov 18, from 50.1 in Oct 18, but new export orders declined further into negative territory.
• India gains traction: India’s manufacturing PMI rose to 54.0 in Nov 18, up from 53.1 in Oct 18, while new export orders grew at the fastest pace in four years.
- The picture for Asia:
• Indonesia’s PMI fell slightly to a five-month low of 50.4 in Nov 18, from 50.5 in Oct 18. New export orders declined for the twelfth consecutive month.
• Malaysia’s PMI fell to a six-month low of 48.2 in Nov 18, down from 49.2 in Oct 18, a six month low. New export orders decreased to the greatest extent in six months.
• Thailand’s PMI ticked lower to 49.8 in Nov 18, down from 48.9 in Oct 18. New export sales rebounded.
However, several Asian economies remain in relatively good shape.
- Singapore’s Nikkei PMI (which combines manufacturing and services) jumped to 53.8 in Nov 18, up from 52.6 in Oct 18, posting a strong gain in new export orders. The SIPMM manufacturing PMI stood at 51.5 in Nov 18, down from 51.9 in Oct 18; the electronics PMI slipped to 49.9 in Nov 18 from 50.5 in Oct 18 – contracting for the first time since Jul 16, amidst a slower growth in new exports.
- Vietnam’s PMI accelerated smartly to 56.5 in Nov 18, up from 53.9 in Oct 18, alongside a gain in new export orders for the second month running.
- Philippines’ PMI rose to an eleven-month high of 54.2 in Nov 18, up from 54.0 in Oct 18. However, new export orders declined at an elevated pace in Nov 18.
Assessment: No recession on the cards but difficult quarters ahead for Asia
November’s global PMI figures suggest that global manufacturing activity will stabilize in the coming months around levels which are uninspiring but decent. While this puts to rest fears of a recession in 2019, a synchronized easing of activity is certainly unfolding across the global economy. Tighter financial conditions and elevated business uncertainty stemming from trade tensions are likely culprits. These will not go away soon.
To be sure, what we are seeing is a moderation in external demand for Asia in the coming quarters, as evinced by lacklustre new export orders, not a sharp dip in growth. But, with growth increasingly reliant on domestic sources, Asian policymakers will have to rely on boosting domestic demand.
On the whole, as the global economy enters a more pedestrian pace of growth in 2019, some difficult quarters are in store for Asian economies ahead. However, still-healthy PMI figures in such Asian economies as India, Singapore, Vietnam, and the Philippines suggest a brighter outlook vis-à-vis others in the region.