China’s vast factory sector flatlined last month as exports shrank and jobs were cut, a worrying trend evident across Asia that argues for yet more policy stimulus as doubts gather over the potency of measures taken so far.
The hard times signaled by a range of surveys was not what the world needed a week after Britain’s vote to leave the EU condemned that bloc to months, if not years, of political and economic instability.
Most of the responses from manufacturers also preceded the Brexit vote, suggesting that this month could be even tougher.
Photo: Reuters
“The unimaginable has happened and the UK vote will cast a long shadow over the UK, Europe and global markets for some time to come,” Westpac Banking Corp’s head currency strategist Robert Rennie said. “A structurally weaker pound, a softer euro and weaker global growth beckons.”
Among the many surveys out yesterday, China’s official purchasing managers’ index (PMI) slipped a tick to 50 last month, dead on the level that is supposed to separate growth from contraction.
One saving grace was the services sector measure, which nudged up to 53.7 in a positive sign for consumer activity.
More worrying was the Caixin version of the PMI, which covers a greater share of smaller firms, where the index fell to a four-month trough of 48.6 last month, from 49.2 in May.
“Panelists widely commented that poor market conditions and a drop in new work had led them to cut output,” Caixin reported. “Data suggested that part of the weakness stemmed from softer foreign client demand, with new export sales declining for the seventh month in a row.”
That had to be a disappointment to Beijing, which has resorted to ever-looser fiscal and monetary policy to support growth and jobs in the world’s second-largest economy.
It was a frustration likely shared by the Bank of Japan, which found major manufacturers in a morose mood despite all of its attempts at aggressive easing.
The reasons were clear in the Markit/Nikkei measure of Japan’s PMI which edged up slightly to 48.1 last month, but stayed in contractionary territory for the fourth straight month.
Government data were no better with household spending down for the third month in a row and core consumer prices suffering their biggest annual drop of 0.4 percent in May since 2013.
Markets reacted by driving Japanese government bond yields deeper into negative territory. Investors now pay 24 basis points for the privilege of lending Japan money for 10 years, a once unthinkable condition that is becoming standard fare.
The news from South Korea was relatively cheery as its PMI reached a six-month high, yet at 50.5 it was just barely into expansionary territory. Indeed, a separate report showed shipments from the world’s sixth-largest exporter fell for an 18th straight month.
India’s PMI did hit a three-month top of 51.7, but it remains an outlier in an Asian region which could face a whole new threat should the Brexit vote herald a wider retreat from free trade.
Vaninder Singh, an economist at Royal Bank of Scotland (RBS) Group PLC in Singapore, said the region had been the greatest beneficiary of globalization and any shift to trade barriers or closed borders would hurt Asia the most.
“Overall, what is clear to us is that the impact, will be limited in the near term, but much more significant in the medium term,” Singh said.
“We expect this event and what it represents to subtract as much as 0.3 percent from growth next year compared to our pre-event baseline and expect Asian central banks to respond with another round of easing,” he said.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has appointed Rose Castanares, executive vice president of TSMC Arizona, as president of the subsidiary, which is responsible for carrying out massive investments by the Taiwanese tech giant in the US state, the company said in a statement yesterday. Castanares will succeed Brian Harrison as president of the Arizona subsidiary on Oct. 1 after the incumbent president steps down from the position with a transfer to the Arizona CEO office to serve as an advisor to TSMC Arizona’s chairman, the statement said. According to TSMC, Harrison is scheduled to retire on Dec. 31. Castanares joined TSMC in