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
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”