The first chart below shows an upward trend for most PMI indices in Asia. A divergent dynamics can be seen in South Korea. It reflects a weak internal demand. Flows of orders decreased more rapidly than new export orders’ flows.
We notice

• In Taiwan, the improvement of the index reflects a strong recovery in export orders’ flows
• In Japan there is a rebound after the negative impact of the VAT rate hike. The index dropped rapidly below the threshold of 50 in April before recovering. The impact is temporary according to companies’ survey. But be attentive: the real retail sales index was still trending downward in May. There is persistence on consumer side. This scenario of recovery in summer was already seen in 1997 (last VAT rate hike). But as demand was weak, the industrial production index plunged from fall onward.
• In India the index is stable but flows from orders’ export have just compensated a reduction in internal demand.
• The two Chinese indices are up, above the 50 threshold. This reflects the less constraining economic policies
• South Korea diverge and is the only one now below 50. Internal demand lacks of momentum.

The second chart is the New Orders to Inventories ratio. There are no surprises. In South Korea the index is above one as Inventories dropped dramatically in June, more than New Orders’ drop.
This upward trend of PMI indices is positive and shows that Asia is no more a drag to the world business cycle.That’s what is important as the Euro Area falters.