Asia’s factory output weakened last month as global recession fears and China’s “zero COVID-19” policy hurt demand, business surveys showed yesterday, adding to persistent supply disruptions and darkening recovery prospects.
Further US interest rate hikes are also expected to force most Asian central banks to prevent sharp capital outflows by tightening their own monetary policies, even if it means cooling already soft economies, analysts say.
Manufacturing activity shrank in Taiwan, South Korea and Malaysia, and expanded at the slowest pace in 21 months in Japan, highlighting the pain from slowing Chinese demand and stubbornly high import costs.
China’s Caixin/S&P Global manufacturing purchasing managers’ index (PMI) stood at 49.2, up from 48.1 in September, but remaining below the 50-point mark that separates growth from contraction.
The private-sector survey was in line with an official PMI survey released on Monday that showed China’s factory activity unexpectedly fell last month.
“Asia is extremely reliant on China. Its zero-COVID policy continues to disrupt supply chains and keep Chinese travelers from returning to Asian tourist destinations. It’s also hurting the region’s exports,” Dai-ichi Life Research Institute lead economist Toru Nishihama said in Tokyo. “Another big risk is the pace of US rate increases. If the [US] Federal Reserve continues to hike rates steadily, that could ignite capital outflows from Asia and hurt exports.”
Japan’s au Jibun Bank Japan Manufacturing PMI fell to 50.7 from September’s 50.8, the weakest growth since January last year.
South Korea’s factory activity shrank for a fourth straight month as orders for exports continued to fall, the PMI showed.
That followed data that showed South Korea’s exports fell for the first time in two years last month, with working-day shipments on average declining 7.9 percent and exports dropping 5.7 percent.
Overall imports gained 9.9 percent, resulting in a trade deficit of US$6.7 billion, the nation’s seventh consecutive monthly shortfall, data showed yesterday.
“Given the country’s open economy and its subsequent reliance on exports, the looming global downturn certainly poses a downside risk for future growth,” S&P Global Market Intelligence economist Laura Denman said on South Korea’s PMI.
Taiwan’s PMI slid to 41.5 from 42.2 in September, while that for Malaysia fell to 48.7 from 49.1, surveys showed.
Factory activity in Indonesia expanded at a slower pace, with the PMI standing at 51.8, down from 53.7 in September.
India was an outlier, with factory activity expanding at a stronger pace as demand remained solid.
PMI was at 55.3, up from 55.1 in September and continuing to stay above the long-run average of 53.7, S&P said.
“Manufacturing employment increased at a marked rate that was one of the strongest since data collection started in March 2005,” as capacity-constrained factories were forced to meet demand for goods by hiring more, the agency said.
Additional reporting by Bloomberg
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