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 Manufacturing surveys on Tuesday confirmed preliminary readings
last month that showed factory output expanding across Asia
following months of decline in its two biggest economies.
But the surveys' new export indexes, which gauge the strength of
overseas demand, showed only tepid growth in a sign that the region
has yet to capitalize on an uneven recovery in the euro zone and
delayed upturn in the U.S. economy.
China's final HSBC/Markit purchasing managers' index (PMI) rose to
50.7, slightly below its preliminary reading, but confirming its
first expansion in six months, from 49.4 in May.
China's official gauge, which is geared more towards bigger
state-owned firms, hit a six-month high of 51.0.
"The economy continues to show more signs of recovery, and this
momentum will likely continue over the next few months, supported by
stronger infrastructure investments," said Qu Hongbin, chief
economist for China at HSBC.
Asian shares firmed slightly after the surveys, which reinforced
market views that the world's second-largest economy was steadying
thanks to stimulus steps taken by Beijing after growth dipped to an
18-month low of 7.4 percent in the first quarter.
Such measures have included targeted reserve requirement cuts for
some banks to encourage more lending, quicker fiscal disbursements
and hastening construction of railways and public housing projects.
However, a downturn in the property sector is clouding the outlook
and economists expect Beijing to stand ready to ease fiscal and
monetary policy further to counter any major spillover into the
broader economy.
The surveys showed export orders growing only marginally, and
policymakers in Beijing and the rest of Asia will be looking ahead
to U.S. data to confirm that the world's biggest economy and Asia's
major export market has finally put its weather-beaten start to the
year firmly behind it.
In Japan, central bank and purchasing managers surveys painted a
similar picture of improving manufacturing activity combined with
still disappointing export performance.
With an April 1 sales tax increase still acting as a drag, the Bank
of Japan's business optimism gauge dipped in the second quarter, but
companies expressed optimism about the outlook, declaring readiness
to boost capital investment and output.
Economists expect a recovery in coming months in both exports and
consumer demand, which is being supported by continued hefty central
bank money injections and government spending.
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The Markit/JMMA purchasing managers' index for June showed factories
were already cranking up activity, with its main gauge coming in at
51.5, above the preliminary reading of 51.1 and topping the 50-point
mark for the first time in three months.
Yet, as in China, an anticipated rebound in exports remained
elusive, with the new export orders index still contracting
marginally.
In Indonesia, Southeast Asia's largest economy, manufacturing
activity rose to a record solely on the back of the strength of
domestic demand that offset a dip in export orders.
The impact of disappointing exports was on full display in South
Korea, Asia's fourth-largest economy, which unlike China or Japan
cannot rely on domestic demand to take up the slack with high
household debt weighing on consumer demand and the government
cutting back on its spending.
The HSBC/Markit purchasing managers' index slid to a seasonally
adjusted 48.4 in June from 49.5 in May, its worst in 10 months.
Separate government data showed exports in June up 2.5 percent from
a year earlier, well below a median 5.1 percent forecast in a
Reuters poll.
India, the continent's third-largest economy, bucked the trend,
owing the rise in its manufacturing gauge to a four-month high
primarily to improved overseas demand.
"Things are gradually improving in India's manufacturing sector.
Output picked up in June, supported by growing order flows,
especially from overseas," said Frederic Neumann, co-head of Asian
economic research at HSBC.
(Reporting by Xiao Shao and Kevin Yao in Beijing, Stanley White,
Leika Kihara and Tetsushi Kajimoto in Tokyo, Christine Kim and
Choonsik Yoo in Seoul, Nilufar Rizki in Jakarta and Anu Bararia in
Bangalore; Writing by Tomasz Janowski; Editing by Kim Coghill)
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