FXTRADING Economic Data Summary (Asia-Pacific | 06/02)

Japanese Manufacturing Remains in Expansion

Japans final Manufacturing PMI for May came in at 54.4, down from 55.1 in April but still firmly within expansion territory, marking a fifth consecutive month of improvement in manufacturing business activity. Production and new orders continued to grow at a solid pace, with demand related to artificial intelligence, electronic equipment, and other technology sectors remaining the key driver. Some export orders also stayed relatively stable, keeping overall manufacturing sentiment in Japan resilient.

However, part of the recent growth has increasingly been supported by front-loaded inventory building. Concerns over potential transportation and supply-chain disruptions caused by Middle East tensions prompted many companies to increase stockpiling purchases, temporarily boosting production. At the same time, both input and selling prices accelerated noticeably, adding further pressure to corporate costs. Although the market remains optimistic about technology-related demand, slowing global demand and rising costs have already started to weigh on business confidence. FXTRADING believes that while Japans manufacturing sector is still expanding, some recent demand appears to have been brought forward. If external demand weakens later on, manufacturing growth could gradually slow.

UK Manufacturing Continues to Expand but Momentum Slows

The UK final Manufacturing PMI rose to 53.9 in May from 53.7 in April, marking the seventh consecutive month of expansion. The survey showed improvements in both production activity and business confidence, suggesting that the UK manufacturing sector has so far maintained a degree of resilience despite high interest rates and external uncertainty.

However, recent growth has largely been driven by precautionary purchasing activity. Concerns that Middle East tensions could push up costs and disrupt supply chains encouraged both manufacturers and customers to accelerate inventory building, temporarily supporting order growth. Nevertheless, supply delays, raw material shortages, and rising transportation costs have pushed manufacturing cost pressures to their highest level in nearly four years, raising doubts about the sustainability of future growth. FXTRADING believes that while the UK manufacturing sector still has short-term support, the current recovery relies more on the inventory cycle than on a broad-based improvement in demand, leaving risks of future volatility elevated.

Eurozone Inflation Pressure Re-Emerges

The Eurozone final Manufacturing PMI fell to 51.6 in May from 52.2 in April, although it remained in expansion territory for a fourth consecutive month. The output index also eased to 51.3, indicating that the pace of manufacturing recovery has started to slow. Rising energy prices and supply issues linked to Middle East tensions are once again putting pressure on European industry.

The survey showed that businesses are simultaneously facing rising costs and worsening supply-chain conditions. Energy and raw material prices increased sharply in May, with production costs recording their largest monthly rise in nearly four years, while supply delays reached their highest level since 2022. FXTRADING believes that although Eurozone manufacturing remains in expansion, the recovery foundation is still fragile. The biggest risk is gradually shifting toward higher costs and supply-chain pressures, meaning inflation concerns are likely to remain a key issue going forward.

Swiss Economic Growth Beats Expectations

Switzerlands first-quarter GDP performance exceeded market expectations. After adjusting for sporting event effects, GDP grew 0.7% quarter-on-quarter, above the market forecast of 0.5%. The industrial sector was the main driver, with industrial value-added rising 1.3% and manufacturing output increasing 1.5%. Excluding chemicals and pharmaceuticals, value-added across the rest of the manufacturing sector surged by 4.6%.

However, significant divergence remains within the Swiss economy. Exports of chemicals and pharmaceutical products declined, dragging overall goods exports down by 2.2%. Meanwhile, domestic demand remained weak, with final domestic demand increasing only 0.1%. Equipment investment and construction investment both fell by 0.2%, private consumption was largely stagnant, and retail and tourism demand also remained subdued. FXTRADING believes that Switzerland‘s current economic growth still relies heavily on industrial support, while the recovery in domestic demand remains limited. If European demand slows again later on, Switzerland’s economic growth momentum could come under pressure.

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