By Fabiana Negrin Ochoa
Asia's factory activity weakened slightly in April, with output growth cooling and employment dropping in a sign of fragile confidence among manufacturers.
Data from S&P Global indicates that Southeast Asia's manufacturing economy continued to grow at the start of the second quarter, but signals about the sector's health were mixed.
The headline purchasing managers index stayed above the neutral 50.0 mark separating expansion from contraction for a fourth straight month in April, but slipped to 51.0 from 51.5 in March.
The readings suggest "the overall manufacturing recovery is starting to cool...and remains uneven," Chua Hak Bin, regional co-head of macro research at Maybank, told Dow Jones Newswires.
Although new orders rose more quickly, signaling a further improvement in demand, S&P noted that most of the upturn came from domestic demand, with export sales stretching their downturn to a 23rd month.
Production growth cooled, but more concerning is that manufacturing employment took a hit, dropping for the first time in six months, S&P said.
"While firms remain optimistic about future output, sentiment slipped to the joint-weakest in almost four years," Maryam Baluch, economist at S&P Global Market Intelligence, said in a report.
By country, the surveys indicated improvements across four of the seven Asean constituents. Indonesia dethroned Singapore at the top of the rankings, while Thailand signaled the strongest deterioration.
April was another positive month for Indonesian manufacturing, with output and new orders rising at decent rates, said Paul Smith, economics director at S&P Global Market Intelligence.
But there was "a little devil" in the details, he said. Export sales fell again, while declines in production and new orders prompted companies to cut staffing. Confidence hit its lowest level in nearly four years.
In Malaysia, the data signaled further downbeat trends across the sector.
"Firms often mentioned that they remained unsure regarding the timing and speed of any demand recovery, with downside risks centered around a muted global economy," said Usamah Bhatti, economist at S&P Global Market Intelligence.
South Korea's survey was also mixed, showing a drop in employment and an unwelcome rise in inflationary pressures but a return to growth in output and new orders, Bhatti said.
Things look brighter in Taiwan, where the manufacturing economy returned to growth in April for the first time in two years. Unlike elsewhere, companies in Taiwan were sufficiently optimistic to add to their staffing levels in April, Smith noted.
Signs of weakness in the leading indicators may dent views on the region's recovery.
Recent forecasts from the IMF and World Bank suggest that economic growth in Asia will slow this year but remain relatively resilient. Still, concerns persist about inflationary--and in some cases deflationary--pressures, as well as choppy growth patterns.
There are also question marks about when borrowing costs will come down. Central banks are walking an increasingly fraught path between supporting slowing growth and balancing price pressures, with expectations for the start of easing pushed back amid a wave of currency depreciation and delayed projections for the rate-cutting cycle in the U.S.
Thursday's slew of data follows PMI gauges in China and the U.S.
The fall in the ISM manufacturing index back below the key 50.0 level in April suggests that the nascent recovery in the U.S. manufacturing sector may already have gone into reverse, said Stephen Brown, deputy chief North America economist at Capital Economics.
China's latest batch of data, meanwhile, suggests its vast manufacturing sector has kept growing but might have lost some steam.
Barclays economists see signs of weaker domestic demand in the China PMIs, suggesting growth will fade quickly in the second quarter, Yingke Zhou and others said in a note.
Write to Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com
(END) Dow Jones Newswires
05-02-24 0024ET
