FXT Economic Data Summary (Asia-Pacific | 09/02)

UK Manufacturing Expansion Slows

The UK Manufacturing PMI slipped from 51.9 to 51.7 in August, a five-month low, but remained above the preliminary 51.5 and stayed in expansion for a tenth straight month. Output rose for a fifth month, though at the slowest pace since April, while new order growth also eased. Export demand remained resilient, with new export business rising for an eighth month on stronger orders from East Asia, the US, the Middle East and Western Europe.

Employment increased for a fifth month at the fastest pace in two years, while business confidence reached a six-month high, with nearly half of firms expecting higher output over the next year. However, smaller manufacturers saw declines in output and orders, while consumer goods production also weakened. Input cost inflation slowed for a third month to its lowest since February. FXT believes UK manufacturing remains in moderate expansion despite softer near-term momentum, supported by exports, employment, confidence and easing cost pressures.

Eurozone Manufacturing Hits Four-Year High

The Eurozone Manufacturing PMI rose from 51.9 to 52.7 in August, a 51-month high, while the Output PMI increased from 52.9 to 53.3, its strongest in 54 months. New factory orders grew at the fastest pace since early 2022, while export orders expanded for only the second time in four and a half years. Germany recorded its strongest manufacturing growth in more than four years, while France also improved, helping drive the broader recovery.

As demand strengthened, manufacturers increased purchasing activity, while employment stabilized after more than three years of decline. Business confidence improved for a fourth month and remained above its long-term average. Input cost inflation fell to a six-month low and output price pressures eased, although supplier delivery times lengthened and Italy and Spain remained relatively weak. FXT believes the manufacturing recovery is broadening, with stronger orders and exports improving the growth outlook, although regional divergence and supply-chain pressures may limit the pace of expansion.

Japan Manufacturing Growth Accelerates

Japan's Manufacturing PMI rose from 54.5 to 54.9 in August, marking an eighth consecutive month of improvement and the second-highest reading since January 2022. New business grew at the fastest pace since January 2018, while export orders recorded their strongest growth since early 2018. Demand from North America, Southeast Asia and East Asia remained robust, with semiconductor and AI-related products providing significant support.

Production growth was the second-fastest since February 2014, employment increased at the strongest pace since February 2018, and purchasing activity reached its highest since April 2022. However, backlogs remained near multi-year highs, highlighting continued capacity pressures. Input cost inflation eased to its lowest since March, but raw materials, oil prices and a weaker yen continued to raise costs, while supplier delivery times lengthened. FXT believes Japan's manufacturing expansion remains well supported by stronger orders, exports and production, although capacity constraints, supply bottlenecks and elevated costs remain key risks.

Australian Orders Improve While Production Weakens

Australia's Manufacturing PMI held at 52.0 in August, remaining in moderate expansion. New orders grew at the fastest pace since January, while export orders returned to growth, signaling improving demand. Business confidence rose for a fourth month to its highest since February, while employment increased for a fourth consecutive month.

Production weakened again after a modest rise in July, while firms reduced purchasing activity and raw material inventories, and finished goods stocks fell at the fastest pace since March. Continued hiring helped reduce backlogs, suggesting weaker production has not yet reflected a significant deterioration in demand. Higher transport and fuel costs pushed up input prices, while supplier delivery times lengthened, although output price inflation slowed for a third month. FXT believes Australian manufacturing is showing improving demand but lagging production, with stronger orders supporting a future recovery while supply-chain and cost pressures may constrain expansion.