Tue, Jul 02, 2019 - Page 10 News List

Asia’s factories falter in June

NO ASSURANCE:A US-China agreement to restart trade talks failed to brighten the outlook, as analysts expressed doubt it would lead to a sustained easing of tensions

Reuters, TOKYO

Factory activity shrank in most Asian countries last month as the simmering US-China trade conflict put further strains on the region’s manufacturing sector, keeping policymakers under pressure to deploy stronger steps to avert a global recession.

A series of predominantly downbeat business surveys and official indicators released yesterday followed the G20 summit in Osaka, Japan, where leaders on Saturday warned of slowing global growth and intensifying geopolitical and trade tensions.

The US and China agreed at the summit to restart trade talks after US President Donald Trump offered concessions, including no new tariffs and an easing of restrictions on tech company Huawei Technologies Co (華為), providing some relief to businesses and financial markets.

However, analysts doubt the truce would lead to a sustained easing of tensions while lingering uncertainty could dampen corporate spending appetite and global growth.

“It’s too early to turn optimistic. The two countries just kicked the can down the road and there’s no knowing what could happen next,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo.

“Global manufacturing activity hasn’t hit bottom yet. US business confidence, particularly that of manufacturers, has been weakening and if this continues, it may hurt economies across the world,” Shinke said.

In China, Asia’s economic engine, the Caixin/Markit Manufacturing Purchasing Managers’ Index came in at 49.4, falling short of market expectations and the worst reading since January.

It was the first time in four months that the keenly watched index has fallen below the neutral 50-mark dividing expansion from contraction on a monthly basis.

Japan also saw manufacturing activity contract last month to hit a three-month low, offering fresh evidence of an economy under the pump as global demand weakens.

A Bank of Japan survey showed big manufacturers’ confidence sank near a three-year low, keeping its central bank under pressure to maintain or even ramp up a massive stimulus program.

In South Korea, factory activity shrank at the fastest pace in four months last month as the global trade slowdown deepened, prompting companies to cut production.

Activity fell in Malaysia and Taiwan, a sign the US-China trade conflict’s impact on the rest of Asia was broadening.

In India and Indonesia, where factories are less dependent on external demand for business, manufacturing activity continued to grow albeit at a slower pace.

Vietnam’s factory activity expanded at faster pace, although new orders rose at their slowest pace since February. The Southeast Asian economy has been a rare beneficiary of the trade war as manufacturers shift their Chinese operations to the country to sidestep US tariffs.

IMF managing director Christine Lagarde welcomed the resumption of trade talks between the two countries, but said more needs to be done to resuscitate a global economy that had already hit a “rough patch.”

Heightening worries over global growth have forced some Asian central banks, such as those in Australia, New Zealand and India, to cut interest rates.

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