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Asia: Latest PMIs signal trouble for world’s growth engine - HSBC

FXStreet (Delhi) – Frederic Neumann, Co-head of Asia Economics Research at HSBC, suggests that the latest PMIs data for the Asian region is spelling trouble for the world’s growth engine with new export orders contracting at their fastest pace since March 2009 for emerging Asia and inventories, too, are rising relative to new orders, suggesting production needs to be throttled back further.

Key Quotes

“Little surprise that employers are shedding workers. Unlike in the past, it won’t be enough to fill the tank with even cheaper cash or extra fiscal spending. The engine needs an overhaul. And that’ll take time. Asia will be stuck in the slow lane for a while.”

“The headline numbers aren’t quite so dire. In fact, they ticked up in a few places, notably in Taiwan, Korea and Malaysia (plus the NBS reading for China) - oh, and France put its head finally above the water. But, with the exception of Japan, India and Australia, manufacturing PMIs remain in contractionary territory.”

“More importantly, new orders don’t show any significant improvement. There was a notable divergence in China, with the official measure up (barely) but the Caixin reading down (to its lowest in 45 months). For the region overall, new orders have contracted since February, the longest stretch since the Global Financial Crisis.”

“What’s worrying is that the drop in new orders comes at a time when inventories are climbing (or at least falling less rapidly than before). The difference between new orders and inventories is a good leading indicator for industrial production in Asia. Unfortunately, this signals a further deceleration of activity into year-end.”

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