Sorry,was out shopping:What the latest PMIs mean for Asia

Bit of a wobble: Asian PMIs dipped last month. Blame the GoldenWeek. With offices closed in early October in China, Korea, Taiwan,and beyond, production got disrupted. Well, that’s part of the story.

    Another is cooling construction activity in China. And yet another isthat exports have lost a bit of their summer shine. So, momentum iseasing into year-end. Curiously, activity elsewhere remains robust,yet that’s somehow bypassing producers in emerging Asia. Plus,price pressures haven’t pulled back as much as one might havehoped. Bottom line: developed markets bouncy, emerging Asia alittle more, well, flouncy. Hardly a stumble, but no signal either of animminent acceleration in the East.

    First heatmap. Headline PMIs across Asia got knocked down a bit. The exception is thePhilippines where the economy continues to fly. Japan also continues to perform well, with thePMI only pulling back marginally. Malaysia and Thailand are below the waterline; India,Indonesia, and Korea are floating just above. China’s NBS dipped to a three month low:presumably reflecting the Golden Week holiday and potentially local industry shutdowns duringthe Party Congress in Beijing. The Caixin measure was unchanged, if uninspiring.

    What a contrast to the West. Sure, the headline ISM pulled back from its 13-year high, but the USPMI ticked higher. Germany’s eased but it’s still above 60. Pretty robust all around.

    New orders paint a similar picture. Down for the most part (chart 1). That suggests that the GoldenWeek is not entirely to blame for Asia’s PMI wobble. For emerging Asia as a whole, new orderspulled back relative to inventory, though that’s still consistent with a mild acceleration in industrialproduction over the coming months (Chart 2).

    Second heatmap. Asia quite mixed: new export orders accelerated in Indonesia, the Philippines,and Vietnam. But they contracted again in India, Korea, and Malaysia. China’s two measuresdiverged, but on average they point lower as well (although, on the export side we’d give a littlemore weight to the Caixin gauge).

    Note the divergence between emerging Asia and advanced economies: the former has seen newexport orders fizzle, while the latter's sizzle (chart 3). The current cycle is benefitting exportersfrom developed markets more, possibly reflecting the ongoing (and potentially accelerating)demand from China for advanced machinery and equipment. President Xi Jinping’s speech at theParty Congress suggests even more aggressive technological upgrading is to be expected.

    Employment is telling a similar tale: tight markets in the mature economies, looser ones inemerging Asia. Manufacturers are hiring briskly in Japan as well, but still shedding workers inChina, Indonesia, Korea, Malaysia, and Thailand. Presumably, new export orders, and overalltrade performance, will need to step up durably in order to fire up employment in the lattereconomies.