Factory activity in Asia failed to speed up last month as the region’s export-driven businesses struggled for new orders in a slow global economy, surveys released yesterday showed.
Output in China, the world’s second-largest economy, barely improved from a month earlier, while Japan, the third-largest, contracted as production was still recovering from earthquakes that struck in April.
“The picture is pretty muted in Asia, both in terms of exports and factory activity,” said Su Sian Lim (林淑嫻), Southeast Asia economist at HSBC Holdings PLC in Singapore.
Photo: Reuters
Though it was the third straight month of improvement, China’s official Purchasing Managers’ Index (PMI) was only fractionally above positive at 50.1. According to China’s National Bureau of Statistics (NBS), the survey also revealed new orders slowed and export orders stalled.
“What is worth paying attention to is that the growth rate of raw material prices declined, showing that market demand remained rather weak and the foundation for manufacturing growth is still unstable,” NBS analyst Zhao Qinghe (趙清河) said in a statement, referring to last month’s figure.
The private Caixin/Markit Manufacturing Purchasing Managers’ index, focusing on smaller firms, made even sorrier reading for global firms reliant on China’s giant market for everything from consumer items, to cars and commodities. It showed conditions deteriorated for a 15th straight month, with that figure coming in at 49.2.
China posted economic growth of 6.7 percent in the first quarter — its slowest since 2009, and there are nagging doubts about the authorities’ ability to engineer a turnaround without fueling debt.
“Today’s PMI figure rules out the possibility of imminent broad-based monetary policy easing” in China, Australia and New Zealand Banking Group (ANZ) economists said in a note to clients.
JAPAN
In Japan, factories grappling to recover from the earthquakes in the southern manufacturing hub of Kumamoto were also knocked by a sharp contraction in external demand.
That showed up in the Markit/Nikkei Japan PMI, which fell to 47.7 on a seasonally adjusted basis — the fastest contraction in three years — from 48.2 in April.
The yen’s recovery to an 18-month high against the US dollar last month has also clouded the outlook for Japan’s exporters.
Elsewhere in Asia, conditions were patchy at best.
Even in India, the world’s fastest-growing big economy, manufacturing activity increased at a tepid pace as output growth softened for the second month in a row.
South Korea’s manufacturing activity improved slightly last month, with the Nikkei/Markit PMI at 50.1 from 50.0 in April, with new export orders up a little.
More alarmingly, separate data showed South Korea’s exports unexpectedly fell 6 percent last month with shipments to China, its biggest customer, contracting 9.1 percent on-year.
TAIWAN
Manufacturing activity in Taiwan deteriorated for the second month in a row with new orders falling at their fastest pace in three months.
Analysts say that weak global demand will continue to pressure corporate earnings and overall economic activity in the region.
“Earnings growth has peaked out, because [Japanese] companies are no longer benefiting from a weak yen. If profits continue to fall, companies could put the brakes on capex,” said Hiroaki Muto, economist at Tokai Tokyo Research Center.
“Looking ahead, while we expect a modest improvement in global demand to support Asian manufacturing in the coming quarters, the pace of recovery is likely to be gradual,” said Krystal Tan, an Asia economist at Capital Economics.
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