Improved APAC growth balance is being driven by easing energy pressure

Overview

This report compiles growth data across regional and country levels in Asia-Pacific covered by Goldman Sachs. It includes June PMI, while most hard macro indicators are only available through May. The core conclusion is that APAC growth momentum is broadly more balanced as energy pressure eases: CAI is generally stable or improving, trade activity remains strong, and financial conditions have loosened in most economies, but PMI divergence, supplier delays, and policy tightening in selected markets still require close attention.

Core views

Goldman believes that overall balance in APAC growth is improving. Although June PMI results diverged month-on-month, the absolute levels still indicate moderate manufacturing expansion; China’s official and non-official PMI readings diverged, India weakened, and Japan improved. CAI showed generally stable or improving conditions in May and preliminary June data, with easing energy price pressure being a key driver behind recent upward revisions to several economies' GDP forecasts. On financial conditions, most economies loosened as energy prices fell, equity markets recovered, or exchange rates adjusted, with Korea and Taiwan seeing the largest easing; Indonesia tightened due to rate hikes and equity market weakness.

Analysis framework

The report applies a regional monitoring framework, combining PMI, GS Current Activity Indicator, GDP forecast revisions, economic surprise indexes, trade activity, and financial conditions indexes, with a cross-section comparison between emerging Asia and developed Asia economies. It also uses a three-month moving average of CAI to smooth short-term volatility and improve comparability with GDP data.

Methodology notes

• Growth trackingGS Current Activity Indicator (GS CAI)

  Current activity indicator

  Used to gauge the near-term strength or weakness of economic activity in each economy. The report notes that monthly CAI is shown only after more than 20% of component data have been released and uses a three-month average to smooth results.

• Macro condition indicatorPMI

  Purchasing Managers' Index

  Used to observe manufacturing and services expansion or contraction. The report states that June PMI month-on-month trends were mixed, but absolute levels overall remain in the moderate expansion range.

• Financial conditionsFinancial Conditions Index (FCI)

  Financial Conditions Index

  Used to measure the combined impact of interest rates, FX, equity markets, and related factors on financial conditions. The report states that most economies saw a loosening of financial conditions over the past week, but Indonesia tightened due to rate hikes and equity declines.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• APAC macro risk assets

  Easing energy pressure and looser financial conditions are generally supportive of risk appetite

  Strengths

  Most economies' CAI stabilized or improved, GDP forecasts were raised, and trade activity remains strong.

  Weaknesses

  PMI month-on-month movement remains mixed, and supplier delays remain.

  Comparison

  Financial conditions eased the most in Korea and Taiwan, while Indonesia remains relatively weaker.

  Risks

  If oil prices rise again, policy continues tightening, or equities retreat, the improvement in financial conditions could reverse.

• FX and rates markets

  Changes in financial conditions are linked to FX, policy rates, and capital market performance

  Strengths

  Lower oil prices reduce pressure on some import-reliant economies, and some markets saw financial easing through exchange-rate adjustment.

  Weaknesses

  Indonesia's rate hikes and equity declines brought tighter financial conditions.

  Comparison

  Thailand contributed more to FCI easing through currency depreciation, while Indonesia was dragged by policy rate increases.

  Risks

  If currency weakness triggers inflation or capital outflow pressures, the sustainability of improved financial conditions may be undermined.

• Commodities and energy-sensitive exposures

  Easing energy price pressure is the key backdrop behind the recent upward revisions in growth forecasts

  Strengths

  Lower energy prices improve corporate costs, household purchasing power, and external balance pressures.

  Weaknesses

  Energy prices themselves are volatile and materially affect growth forecasts and inflation trajectories.

  Comparison

  Economies with higher energy import dependence are more likely to benefit from oil-price relief.

  Risks

  If geopolitics or supply disruptions push oil prices higher again, the current growth-improvement thesis could weaken.

Key data

• Data coverage periodJune PMI; most hard economic data through MayThe report explicitly states that most hard data remain as of May, while PMI has been updated through June.
• Regional PMIMonth-on-month changes were mixed, but absolute levels overall still support stable manufacturing growthSupplier delays are still an issue for many manufacturers.
• China PMIOfficial PMI strengthened, while non-official indicators weakenedThis shows divergence in how growth signals are measured in China.
• India and Japan PMIIndia manufacturing and services both weakened; Japan manufacturing and services both strengthenedReflects diversification of momentum within the region.
• CAIOverall stable or improving in May and preliminary JuneReport charts show early CAI readings improving, including improving China CAI.
• Growth forecastsGoldman recently raised GDP growth forecasts for multiple economiesPrimarily reflects easing energy price pressures.
• Financial conditionsFinancial conditions eased in most economiesKorea and Taiwan relaxed significantly due to equity gains; Thailand also loosened as the currency weakened.
• Indonesia financial conditionsmeaningfully tighterTightening came from a policy rate hike and stock market declines.

Impact & implications

For investors, easing energy prices improve the combined APAC growth and financial conditions backdrop, supporting risk appetite toward regional cyclical and trade-linked assets. However, diversification within the region remains clear: India’s short-term sentiment weakened, Indonesian financial conditions tightened, supply-chain delays, and PMI measurement differences suggest the improvement cannot be generalized into a full-scale recovery.

Risks

• Supplier delays continue to trouble many regional manufacturers and may limit the extent of manufacturing improvement.
• PMI readings diverge across countries and between official and non-official benchmarks, indicating growth signals are not uniform.
• Indonesia's financial conditions tightened due to higher policy rates and equity declines, which could weigh on local growth momentum.
• If energy prices rise again, the rationale for recent GDP forecast upgrades could weaken.
• This report is a regional data track, and most hard economic indicators are still lagged to May, so preliminary June signals still need confirmation from subsequent data.

What to watch

• Whether subsequent June and July hard economic data confirm CAI improvement.
• Whether oil prices and energy price pressure continue to ease.
• Whether the divergence between China's official and non-official PMI closes.
• Whether India manufacturing and services PMI weakness persists.
• Whether Japan PMI improvement can translate into stronger hard data.
• Whether the financial conditions easing driven by stock gains in Korea and Taiwan remains durable.
• How Indonesia's rate hikes, equity performance, and FCI tightening affect growth.
• Whether East Asian exports and overall trade activity can remain strong.