October saw mounting strain on Asia’s manufacturers as industrial activity in China declined. This put the region’s critical exporters under more pressure due to increased pricing and weakening global demand.
China, Japan, and South Korea’s purchasing managers’ indexes (PMIs) revealed declining activity, while Vietnam and Malaysia also had to deal with the broader effects of a slowdown in China.
According to a private sector poll released on Wednesday, China’s Caixin/S&P Global Manufacturing PMI dropped to 49.5 in October from 50.6 in September, once again dropping below the 50.0 point barrier that divides expansion from contraction.
The Chinese poll put doubt on recent prospects of a revival in the second-largest economy in the world by echoing a negative official PMI figure from Tuesday that also revealed an unexpected decline in activity. Regarding China’s survey results, Wang Zhe, an economist at Caixin Insight Group, stated that “generally, manufacturers were not in high spirits in October.”
“Although the economy appears to be nearing its bottom, the recovery’s base is not strong. Expectations are still low, there are still a lot of internal and external uncertainties, and demand is poor.”
China’s downturn affects South Korea and Japan, whose manufacturers significantly depend on the Asian powerhouse for their goods.
October’s final au Jibun Bank PMI revealed that industrial activity in Japan contracted for a fifth consecutive month.
That was the day after government data revealed that September manufacturing output in Japan increased far less than anticipated due to a sharp slowdown in demand. Due to weak Chinese markets, Japanese equipment manufacturers Fanuc (6954.T) and Murata Manufacturing (6981.T) recently released their disappointing six-month results.
For the sixteenth consecutive month, industrial activity in South Korea decreased, while PMIs from Taiwan, Vietnam, and Malaysia also revealed ongoing reductions in activity. October saw a second consecutive month of slower growth in industrial activity in India as lower demand and growing raw material costs dampened corporate optimism.
“In general, the October PMIs for emerging Asia declined even more within contractionary territory,” said Capital Economics’ emerging Asia analyst Shivaan Tandon. “The outlook for manufacturing in the region remains bleak in the near term as elevated inventory levels and weaker foreign demand are set to curtail production.”
The International Monetary Fund (IMF) has cautioned that China’s sluggish recovery and the potential for a longer-lasting real estate crisis could further harm Asia’s economic prospects. The IMF lowered its growth prediction for Asia to 4.2% for next year from 4.4% in April and down from 4.6% for this year in its World Economic Outlook published last month.
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