Good news from Asia with surveys of manufacturing showing a pick up in activity in most economies. South Korea’s sector saw the first growth in 13 months, Japan is still growing strongly, despite signs of a slight slowing.
China’s private survey of smaller companies showed a rebound in the pace of activity, as did last week’s official survey of larger Chinese companies.
In Australia the AIG survey of manufacturing revealed a 0.2 points rise to 55.0 in June – a ninth consecutive month of expansion for sector.
And the first results of the new survey – the Commonwealth Bank’s/Markit Purchasing Managers Indexes – showed uniform growth across manufacturing and services, echoing the buoyancy showing up in successive surveys of business conditions and confidence from the monthly National Australia Bank reports.
In fact the Australian economy is as buoyant as any in Asia – a situation the gloomsters and negatives neglect to address when telling us that things are tough and miserable.
But as far as Asia was concerned the strongest result came in the quarterly Tankan survey of Japanese manufacturing and service companies from the country’s central bank.
This showed that big Japanese manufacturers’ confidence levels improved for a third straight quarter in the three months to June to reach their highest level in more than three years.
The results, added to solid employment and jobs data (but not industrial production) pointing to the gathering momentum in the Japanese economy.
And yet despite that, Reuters reported that the Bank of Japan will likely downgrade its economic forecasts for Japan.
The headline diffusion index (DI, which is the net result of positive responses and negatives) measuring big manufacturers’ sentiment stood at plus 17 in June, improving from plus 12 in the previous survey in March.
It exceeded market forecasts of plus 15 and was the highest since March 2014.
Big non-manufacturers’ sentiment index stood at plus 23, up from plus 20 in March. It was the second straight quarter of improvement and the highest level since December 2015.
But big manufacturers and non-manufacturers expect business conditions to worsen slightly three months ahead, the survey showed.
Big firms plan to raise their capital spending by 8.0% in the current fiscal year ending in March 2018, compared to forecasts for a 7.4% rise, according to the survey.
Japan’s economy expanded at an annualised rate of 1.0%9which was down sharply from the first estimate of 2.2%) in the first quarter on robust exports and a boost from private consumption.
That first estimated prompted the Bank Of Japan to upgrade its economic assessment in April, ahead of the sharp downward revision..
But consumer inflation remains subdued (as we pointed out yesterday), making it much tougher the central bank has in achieving its ambitious 2% which was supposed to have happened by late 2014.
The final June Markit/Nikkei Japan Manufacturing Purchasing Managers’ Index (PMI) was 52.4, higher than a mid month reading of 52.0 but still below a final 53.1 in May.
The index remained above the 50 threshold that separates expansion from contraction for the 10th consecutive month.
“Although final PMI data for June confirmed that growth slowed, the sector continues to benefit from rising global demand, especially from South East Asia which was a key source of new order wins," said Paul Smith, senior economist at IHS Markit, which compiles the survey.
