Factories in Asia’s largest economies cranked up activity last month as a synchronized upswing in growth globally pointed to solid consumption of manufactured goods heading into the lucrative end-of-year shopping season.
However, pockets of weakness in regional economies are likely to keep Asian central banks slanted toward more accommodative monetary policy, even as their Western counterparts move to scale back stimulus.
China’s central bank on Saturday cut the amount of cash that some banks must hold as reserves for the first time since February last year in a bid to encourage more lending to struggling smaller firms and energize its lackluster private sector.
The world’s second-largest economy has defied expectations of a slowdown this year, growing at a strong clip in the first half thanks to a construction boom.
Beijing’s latest easing comes ahead of a key Chinese Communist Party gathering this month.
“It’s a solid backdrop for manufacturing in the region as we head toward the big shopping season,” said Rob Carnell, head of Asia research at ING.
That sentiment was backed by an official purchasing managers’ index from China’s vast manufacturing sector, which showed activity last month grew at the fastest clip since 2012 on solid demand.
However, cost pressures from high raw materials prices and continued underperformance of smaller firms mean some manufacturers are still struggling, which was reflected in a separate private survey of Chinese factories showing growth slowed last month.
In Japan, factory activity grew the fastest in four months, thanks to robust exports growth and underpinned improving economic momentum even though inflation remained tepid.
Meanwhile, a closely watched Bank of Japan (BOJ) survey showed big manufacturers have more confidence in business conditions than they have had for a decade, thanks to a weaker yen and robust global demand.
In South Korea, manufacturing activity expanded at the fastest pace in almost two years.
Indonesia, Southeast Asia’s biggest economy, also showed an improvement in factory growth, but the pace was tepid and production contracted slightly.
Indonesia has cut interest rates twice this year in a bid to boost stubbornly weak domestic consumption, while India slashed rates once in August to spur growth and inflation.
Those moves, along with the BOJ’s commitment to maintain its ultra-low rates for the foreseeable future, marked a contrast to the West’s shift toward tighter policy, although analysts expect the extent of stimulus in Asia to be measured.
“I would characterize some of the easings [in Asia] as a bit of fine-tuning really and not a major divergence in policy with the West,” Carnell said. “The regional economies continue to grow at a decent pace.”
Indeed, a synchronized upswing in the global economy has been a boon to manufacturers from China to Britain and the US, with export-reliant Asia enjoying a spurt in growth led by an upsurge in sales of electronics.
A raft of European PMIs scheduled for publication later yesterday were expected to paint a picture of robust manufacturing momentum globally.
Shipments from Japan and South Korea — two major exporters — remained robust with the boom helping their economies grow at a decent clip.
In Taiwan, another export bellwether, factories continued to expand at a steady pace on higher global demand.
In South Korea, higher memorychip and steel product sales lifted exports by 35 percent year-on-year in the longest stretch of expansion since 2011.
Full-year growth in China is widely expected to handily meet the government’s target of 6.5 percent, after stronger-than-forecast growth of 6.9 percent in the first half, driven by a year-long building boom and solid exports.
That augured well for Asia’s manufacturers for the rest of the year.
“Looking ahead, we expect conditions in the region’s manufacturing sectors to remain fairly healthy over the coming months, helped by a combination of loose domestic monetary policy as well as firmer global growth,” said Shilan Shah, economist at Capital Economics Ltd.
Given price pressures are largely contained in places like China and Japan as well as smaller economies including Singapore and Indonesia, policymakers will have headroom to boost stimulus if the need arises.
“The big picture is that inflation in most of these economies is set to stay benign, giving their central banks scope to keep interest rates low to support growth,” Shah said.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
Apple Inc has been developing a homegrown chip to run artificial intelligence (AI) tools in data centers, although it is unclear if the semiconductor would ever be deployed, the Wall Street Journal reported on Monday. The effort would build on Apple’s previous efforts to make in-house chips, which run in its iPhones, Macs and other devices, according to the Journal, which cited unidentified people familiar with the matter. The server project is code-named ACDC (Apple Chips in Data Center) within the company, aiming to utilize Apple’s expertise in chip design for the company’s server infrastructure, the newspaper said. While this initiative has been
GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, yesterday said that revenue would rise moderately in the second half of this year, driven primarily by robust demand for advanced wafers used in high-bandwidth memory (HBM) chips, a key component of artificial intelligence (AI) technology. “The first quarter is the lowest point of this cycle. The second half will be better than the first for the whole semiconductor industry and for GlobalWafers,” chairwoman Doris Hsu (徐秀蘭) said during an online investors’ conference. “HBM would definitely be the key growth driver in the second half,” Hsu said. “That is our big hope
The consumer price index (CPI) last month eased to 1.95 percent, below the central bank’s 2 percent target, as food and entertainment cost increases decelerated, helped by stable egg prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. The slowdown bucked predictions by policymakers and academics that inflationary pressures would build up following double-digit electricity rate hikes on April 1. “The latest CPI data came after the cost of eating out and rent grew moderately amid mixed international raw material prices,” DGBAS official Tsao Chih-hung (曹志弘) told a news conference in Taipei. The central bank in March raised interest rates by