Asia’s factory activity slows due to global slowdown and cost pressures

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  • Japan Aug PMI marks weakest growth since January last year
  • Manufacturing activity is shrinking in Taiwan, Malaysia
  • Slowing demand from China and the US is weighing on Asia’s economies

TOKYO, Oct 3 (Reuters) – Asia’s factory output weakened for most of September as slowing demand in China and advanced economies added to the pain of ongoing cost pressures, surveys showed on Monday, raising prospects for an economic recovery the region clouded.

Manufacturing activity fell in Taiwan and Malaysia and grew more slowly in September in Japan, India and Vietnam than in August as rising commodity costs and a weakening global outlook weighed on business sentiment.

The polls came after China’s factory and service activity data on Friday pointed to a further slowdown in the world’s second-largest economy as strict COVID lockdowns disrupted production and dampened sales. Continue reading

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“We see economic conditions in China, the United States and Europe deteriorating. That’s definitely weighing on Asian manufacturing activities,” said Toru Nishihama, chief economist at the Dai-ichi Life Research Institute in Tokyo.

“While the supply disruptions may have run their course, Asia is now suffering from the collapse in global demand.”

The data clouds the prospects for Asia’s recovery from the COVID-19 pandemic and could add to concerns of a global slowdown as major central banks embark on the most aggressive round of rate hikes in decades to tame rising inflation.

au Jibun Bank’s Japan Manufacturing Purchasing Managers’ Index (PMI) fell to 50.8 in September from 51.5 the previous month, marking the weakest growth rate since January last year.

New orders shrank at their fastest pace in two years, while output fell the sharpest in a year on weaker demand from China and other trading partners, the Japanese PMI survey showed. Continue reading

“Yen weakness is also doing little to bolster export demand, instead driving up imported inflation sharply and driving domestic price pressures even further,” said Joe Hayes, senior economist at S&P Global Market Intelligence.

Taiwan’s PMI hit 42.2 in September, down from 42.7 in August, and stayed below the 50 mark, which separates growth from contraction on a monthly basis.

The global economic slowdown is clouding the prospects even for high-growth sectors. Leading electric car maker Tesla Inc (TSLA.O) announced lower-than-expected third-quarter electric vehicle deliveries on Sunday. Continue reading

While the company said logistical challenges overshadowed its record deliveries, some analysts raised concerns about demand for high-ticket items due to slowing global growth.

Vietnam’s PMI fell to 52.5 from 52.7 in August, while Malaysia’s slipped to 49.1 from 50.3, the surveys showed.

India’s factory growth fell to a three-month low in September on a slowdown in demand and output despite easing inflationary pressures and strong business confidence. Continue reading

Rising inflation forced US and European central banks to raise interest rates and fueled fears of a sharp fall in global demand, which had been supporting Asian exports.

China’s slowdown has also clouded Asia’s economic recovery. With few signs that Beijing will ease significantly on zero-COVID anytime soon, many analysts expect China’s economy to grow just 3% this year, which would be the slowest since 1976, excluding growth of 2, Excludes 2% during first COVID hit in 2020.

Data showed on Friday that China’s official PMI rose to 50.1 in September from 49.4 in August. But separate data showed that China’s Caixin/Markit Manufacturing PMI fell more-than-expected to 48.1 in September, from 49.5 in August.

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Reporting by Leika Kihara; Editing by Ana Nicolaci da Costa

Our standards: The Thomson Reuters Trust Principles.

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