Weekend Asian Data Looks Better
The month of June begins with two important economic releases from Asia.
First, the China PMI (Figure 1.1) for May defied a long running history of seasonal May weakness, recording a 50.8. That figure beats consensus estimates of 50.0 and the month of April’s 50.6.
Additionally, trade figures from South Korea came in better than expected, with May exports rising +3.2%, better than last month’s +0.4% and consensus estimates for a (-0.9%) contraction.
Let’s take a look inside the figures…
Strong monthly increases across 5 components:
- Output (Production) May 53.3 April 52.6 March 52.7 February 51.2 January 51.3
- New Orders May 51.8 April 51.7 March 52.3 February 50.1 January 51.6
- New Export Orders May 49.4 April 48.6 March 50.9 February 47.3 January 48.5
- Imports May 50.3 April 48.7 March 48.9 February 48.1 January 49.1
- Input Prices May 45.1 April 40.1 March 50.6 February 55.5 January 57.2
May 2013 China PMI rise defies May seasonal weakness trend:
- April 2012 53.3 May 2012 50.4
- April 2011 52.9 May 2011 52.0
- April 2010 55.7 May 2010 53.9
- April 2009 53.5 May 2009 53.1
- April 2008 59.2 May 2008 53.3
- April 2007 58.6 May 2007 55.7
- April 2006 58.1 May 2006 54.8
South Korea May Exports
- Overall May exports (Figure 1.2) rose +3.2% in May, better than April’s +0.4% and consensus estimates for a contraction (-0.9%).
- Overseas sales of wireless telecommunications devices surged +62.5% in May.
- Exports to the U.S. rose +21.6%.
- Exports to China rose +16.6%.
- South Korea’s trade surplus increased to $6 billion in May from $2.4 billion in April, the largest surplus since October 2010.
- Imports (-4.8%) were down for a fourth consecutive month.
After a (-1.43%) trading decline for the S&P 500® Index (SPX) (Figure 1.3) on Friday, this weekend’s news might not be enough to reverse the near-term negative momentum for the SPX after last week’s overall (-1.20%) loss. However, there are significant positive implications from these two Asian economic reports for the second half of 2013.
First of all, despite a (-13.6%) year-to-date decline in the Japanese yen that is challenging South Korea’s export economy, it appears there is economic resiliency to actually absorb the yen weakness. Keep in mind, half of South Korea’s economy is export-based. Technology is a large component of those exports.
For China, the May PMI should provide evidence that the economic malaise since the summer of 2012 is ending. Investors should begin to expect acceleration in China’s economic growth over the coming months. Next weekend’s China trade figures should now be monitored more closely as well as President Xi Jinping’s visit to North America this week. His visit concludes next weekend in California with a meeting with President Obama.
Figure 1.1 China PMI, 2012 to Present
Figure 1.2 South Korea Exports, August 2012 to Present
Figure 1.3 S&P 500 Index (SPX), Year to Date