Asia PMI Headlines Seem Bright, But Underlying Data Looks Grim

By Fabiana Negrin Ochoa

Gauges of factory activity across Asia showed solid growth in output and orders in May, but the momentum appears more fragile than the headline figures suggest.

S&P Global purchasing managers indexes for seven Asian economies all remained above the neutral 50 mark last month, signaling expansion.

The surveys also showed cost pressures at historically elevated levels, extending a period of strain that's eroding companies' ability to absorb the inflation shock stemming from the conflict in the Middle East.

Without stockpiling by manufacturers and their customers to build precautionary inventories as energy prices rise and supplies remain uncertain, the headline figures would almost certainly be weaker.

Taiwan posted one of the strongest readings in May, with its PMI rising to 56.1 as manufacturing output expanded at the fastest pace since July 2021.

However, the strength come alongside evidence of greater strain on supply chains, with average lead times for inputs lengthening markedly as firms reported shipping delays and product shortages tied to the Iran crisis.

The trend was echoed in China, South Korea, Vietnam and the Philippines as manufacturers grappled with the fallout of the conflict.

The May PMIs showed that as tensions stretched into a fourth month, cost burdens are getting heavier across the region. In many cases, companies raised selling prices to protect margins.

Given the role played by stockpiling, the sustainability of the broad-based upturn in manufacturing remains questionable, said economists at S&P Global Market Intelligence.

If cost pressures continue to build, the current momentum could soon fade once inventories are replenished, said Annabel Fiddes, an economist at S&P.

Perhaps surprisingly, measures of business confidence where overwhelmingly positive, buoyed in part by expectations of continued demand for electronics and artificial intelligence-related goods.

As with demand, however, sentiment will depend largely on how the Middle East situation evolves. So far, signs of progress toward a resolution have been accompanied by fresh hostilities.

In South Korea, confidence among manufacturers reached a three-month high in May amid hopes for improved inflation, supply and exchange-rate conditions.

With optimism hinging on of war-driven price and supply disruptions easing, the timing of any recovery appears uncertain, said Usamah Bhatti of S&P Global Market Intelligence.

Write to Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com

(END) Dow Jones Newswires

June 01, 2026 06:05 ET (10:05 GMT)