Purchasing managers' index (PMI) surveys in March reflected material cost pressures for Asia as well as a sharp decline in export orders following the Middle East conflict, HSBC said in a recent research note.
Manufacturing in the region continued to grow, albeit at a slower pace, in March, with Korea and Thailand showing strong performances, HSBC said.
However, the conflict made the outlook more complex, making suppliers' delivery times longer and accelerating input cost inflation. These have slowed firms' ability to convert demand into output, the research firm said.
Increasing costs stemmed from rising raw material and energy prices, along with weaker exchange rates.
Producers have been raising output prices to pass increased input costs downstream, with inflationary implications ahead, the equity research firm said.
AI-driven demand continues to be a major anchor for some manufacturing segments, but shortages and cost inflation could weaken demand, according to HSBC.
In Vietnam, optimism declined to a six-month low. The country also observed the sharpest drop in new export orders among Southeast Asian countries, given its high exposure to Middle Eastern oil and gas, HSBC said.
India's export orders increased, although the impact of energy shortages on domestic demand narrowed the improvement.
Japan showed strong export orders in the first two months of 2026, although this was curtailed after the war ensued. The country still had solid demand dynamics for semiconductors and defense, according to HSBC.
Comments