Manufacturing activity in Asia’s top two economic powerhouses slowed further this month, a disappointing outcome that calls for yet more stimulus and puts pressure on the US and Europe to do more of the heavy lifting to drive global growth.
The flash HSBC/Markit Purchasing Managers’ Index (PMI) for China fell to a one-year low of 49.2, from 49.6, pushing deeper below the 50-point level that is supposed to separate growth from contraction.
“The worse-than-expected PMI suggests downside risks to China’s 2015 growth outlook,” analysts at Barclays wrote in a note to clients.
“We believe downside risks to growth and inflation are materializing given the disappointing Q1 growth rate, and maintain our below-consensus 6.8 percent growth forecast for 2015,” they said.
The soggy outcome illustrated why the People’s Bank of China on Sunday cut the amount of cash that banks must hold as reserves to help spur lending.
It slashed the reserve requirements by a bigger-than-expected 100 basis points (bps).
“We continue to call for two more 50bps reserve requirement ratio cuts and three more 25bps benchmark rate cuts over the rest of the year,” Nomura analysts said in a research report.
Hopes of yet more stimulus have helped sparked a massive rally in the local share market. The CSI300 index of the largest listed companies in Shanghai and Shenzhen has risen more than 30 percent so far this year.
It briefly scaled a fresh seven-year peak of 4,767.9 in the wake of the survey, but has since drifted off the high.
The report was not all bad, with overseas demand picking up this month and new export work rising for the first time in three months.
A separate survey showed that Japan’s PMI slid to 49.7 from 50.3 in April as new orders continued to shrink and manufacturing production fell for the first time since July last year.
Yet the rate of decline for production was only fractional and encouragingly employment returned to growth.
“Meanwhile, reports of a favorable yen/dollar rate continued to help improve price competitiveness, as companies noted a rise in new export orders for the tenth consecutive month,” Markit economist Amy Brownbill said.
The result is unlikely to drive the Bank of Japan into action. The Japanese central bank has steadfastly maintained its outlook for a recovery that will keep the economy on track to hit its 2 percent inflation goal over time.
At next week’s policy review, the bank is expected to hold off on expanding its already massive monetary stimulus, but might lower its inflation forecasts.
Meanwhile, the PMI surveys for the eurozone released yesterday showed German manufacturing activity dropped to 51.9 from 51.5 last month, while a French PMI unexpectedly dropped to 50.2 from 51.5.
Huawei Technologies Co (華為) largely omitted mention of its controversial Mate 60 smartphone series at a grand showcase of its new consumer products yesterday. The Shenzhen-based company would increase smartphone production in response to demand, said consumer division chief Richard Yu (余承東), without naming the handset triggering that surge. The Mate 60 Pro earned international notoriety with its advanced made-in-China processor last month, causing concern in Washington about Huawei’s progress toward developing in-house chipmaking capabilities despite US trade curbs. Huawei’s new phones have fired up the company’s sales and were among the top sellers in China in the week before Apple Inc’s
SLUMP: The electronics, machinery and traditional industries posted the largest decline in the past year; overall, sectors showed gains over the previous month Taiwan’s industrial production index decreased 10.53 percent year-on-year to 91.38 last month, falling for a 15th consecutive month on an annual basis, as weak global economic growth continued to weigh on end-market demand and investment momentum, the Ministry of Economic Affairs said on Saturday. The industrial production index gauges output in Taiwan’s four main industries: manufacturing, electricity and gas supply, water supply, and mining and quarrying. Last month’s decline was the smallest contraction since March when the index dropped 16.03 percent from a year earlier. On a monthly basis, the index rose 7.28 percent, marking a second straight month of improvement,
US-based tech giant Google said yesterday that its efforts to build four underseas cables to connect Taiwan with the world had created more than 64,000 jobs and generated about US$26 billion in GDP for Taiwan as of 2021. The US company has transformed Taiwan into a strategic cloud infrastructure hub in the world. The four undersea cables are part of the company’s investments in cloud infrastructure in Taiwan, and on the back of the undersea cables, a data center and a Google Cloud Region, which is a geographic area in which Google provides infrastructure and services for deploying applications, Google said in
SHOPPING SPREE: The wholesale sector has lagged behind as consumer goods spending has risen, with food and beverage spending hitting almost NT$90 billion Sales in the retail, and food and beverage sectors last month continued to rise, increasing 4.3 percent and 14.3 percent respectively from a year earlier, while sales in the wholesale sector fell for a 10th straight month and declined 5 percent annually, the Ministry of Economic Affairs said on Saturday. The ministry forecast that retail, and food and beverage sales would retain growth momentum this month due to the opening of new shopping malls and the Mid-Autumn Festival. However, the wholesale sector is predicted to see sales drop for another month on an annual basis, as end-market demand remains weak and inventory
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