Why Asia's industrial production is sitting pretty amidst global chaos

IP growth is usually at 5%.

According to DBS, global manufacturing seems to have ground to a halt. Yesterday, China reported a manufacturing PMI that dropped to 50.1 in June, barely above water.

The US PMI resurfaced in June to 50.9 but the series has been bobbing around the 50 mark for three months now – treading water at best.

Here's more from DBS:

The Eurozone PMI improved in June but only to 48.8. Manufacturing there is still shrinking. Is the outlook really as bad as the PMIs suggest?

In Asia, no. First of all, China’s mnfg PMI has been bouncing around the 50.5 level for the past 14 months. Yesterday’s data isn’t significant news.

More importantly, a 50-ish reading isn’t associated with zero growth like it is, say, in the US. In China, a 50 gets you 9% industrial production growth and a 55 puts you close to 15%.

The latest readings on China’s industrial production continue to show growth in the low 9% area. It is true that China’s service sector PMI is also fading but that’s the operative word: fading. Easing – very much in line with the authorities’ intent to get a firm hold on the economy and the financial sector before moving on to the next development phase.

More generally across Asia, industrial production continues to grind northward, notwithstanding two years of 2% growth in the US and negative growth in the Eurozone.

Since early-2010, IP growth has run at about a 5% (saar) pace. Since mid-2012, the pace has accelerated closer to a 10% pace. Absent global shocks, there’s no reason not to expect that to continue.