Asia : PMI Surveys in March – Stronger Momentum

March surveys in Asia show that economic momentum is strengthening.

Synthetic indices are all above 50 in March which means that economic activity is growing quicker. Nevertheless even if they are above 50, their level are still low. It is not a break on the upside. What is currently important is the homogeneity between all these news from Asia. In other words, they are all going in the same way which means positive contagion between countries and at the end a stronger outlook for the world economy as Asia is the world economy engine. India is less involved in this dynamic.


In the first chart PMI synthetic indices are shown on a quarterly average basis. We see that the lowest point was in the third quarter of 2012 and economic activity has accelerated since then. It is clear in China, South Korea and Taiwan. In Japan the lower point was in the last quarter of 2012. For all these countries we see the major role played by China. South Korean, Taiwanese and Japanese economic dynamic is conditioned by China’s momentum. Lower Chinese growth in the first part of 2012 had a negative impact on these three countries. Recovery since the last quarter of 2012 creates an impetus on Asia during the first quarter. We see that clearly on the chart with a lag between China and the others, we can see this also on Chinese exports. The acceleration seen in Chinese exports for the first two months of this year comes from Asia.

In India there is no acceleration and looking at this chart and the three others explain the Reserve Bank of India behavior. On March the 19th the central bank has lowered its interest rate due to low growth. Figures in this survey let us imagine that they could continue.

To be more precise, the second chart give details by month. There is an acceleration in March showing a strengthening of economic activity. This is clear in South Korea, Taiwan and even Japan where the index is above the threshold of 50 for the first time since May 2012.


We’ve seen a change in regime during the first quarter and this will probably continue as flows of new orders are stronger (close to 52 for all) and homogeneous: new orders are stronger everywhere. This will lead to higher production in the coming months as the New Orders to Inventories ratio is above 1 everywhere. This means that inventories are lower and it will be necessary to increase production to satisfy demand.


New Export Orders are also stronger, mainly in South Korea, Taiwan and Japan. In Japan the index level is close to 54 showing that the situation has changed. This can be a consequence of Mr Abe strategy. The yen versus dollar exchange rate has depreciated by more than 20% since December. This gives stronger competitiveness to Japanese goods and improve exports outlook.

Chinese numbers are still low on export orders. This means that Chinese improvement is still coming from inside but the stronger dynamic has a positive impact on other Asian countries. It doesn’t come from the USA as China is the medium between the USA and other Asian countries.

India on New Orders are weak.


For the European countries this stronger and more consistent momentum in Asia is good news as German and French exports are very sensitive to Asian situation. Nevertheless even if it has a positive impact we cannot dream yet as the levels of all these surveys are still low. They just show meager growth and the contagion impact is not strong yet. But this goes on a way to improve the world growth prospect and limits the risk of a negative shock in the Euro Area. And for that it is positive.

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  1. Pingback: China: Trade deficit will be temporary | Le Blog de Philippe Waechter

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