Asian manufacturing sector in contraction
The latest Asian PMIs point to continued deceleration of growth momentum in the region, but domestic-driven economies are more resilient than export-dependent ones.
The average of manufacturing purchasing manager indices (PMIs) for Asia (excluding Japan) came in at 49.6 in June, down from 49.9 in May. This was the second consecutive month in which this measure fell below the 50 threshold and indicates that manufacturing activity in Asia is contracting.
China is the largest contributor to the slowdown, but some other export-driven economies, particularly Taiwan and South Korea, have also shown weakened momentum as global demand declines and trade tensions persist.
PMIs in domestic-driven economies remain above 50, suggesting continued expansion in economic activity, although momentum also moderated somewhat in June compared to the previous month, except for the Philippines.
Vietnam and Thailand are turning out to be exceptions to the weakness seen among Asian export-driven economies , with PMI readings rising in both countries in June, especially in Vietnam. In our view, Vietnam is one of the biggest beneficiaries of the ongoing US-China trade tensions. Vietnam has turned out to be one of the main alternative suppliers for goods from China hit by US tariffs.