ANN/THE STRAITS TIMES – Asian factories, including China’s manufacturing sector, showed signs of a tentative recovery in August and chipmakers benefited from firm demand, private surveys showed yesterday, but economic headwinds loom.
Analysts say prospects of slowing United States (US) growth, which is likely to lead to interest rate cuts by the US Federal Reserve in September, and uncertainty over the outcome of the US presidential election cloud the economic outlook.
China’s Caixin/S&P Global manufacturing purchasing managers’ index (PMI) rose to 50.4 in August from 49.8 in July, the private survey showed yesterday, beating analysts’ forecasts and exceeding the 50 mark that separates growth from contraction.
The reading, which mostly covers smaller, export-oriented firms, shows a more optimistic view than an official PMI survey released on August 31, which indicated an ongoing decline in manufacturing activity in August.
“The PMIs for August suggest that economic momentum held broadly steady last month, with modest improvements in manufacturing and services helping to offset a further slowdown in construction activity,” Capital Economics assistant economist Gabriel Ng said in a research note.
“But with factory gate price declines accelerating, the economy clearly remains at risk of slipping back into deflation.”
Factory activity in South Korea also expanded in August, while Japan saw a slower rate of contraction due in part to solid global demand for semiconductors.
Japanese manufacturers also gained from a rebound in car output after a safety scandal led some plants to temporarily suspend production.
But manufacturing activity contracted in Indonesia, the surveys showed, underscoring the pain some of the region’s economies are facing from China’s prolonged slowdown.
“Chip-producing countries are doing fairly well, but China’s slowdown will continue to drag on Asia’s manufacturing activity for quite some time,” said chief emerging market economist at Dai-ichi Life Research Institute Toru Nishihama.
“Slowing US demand could add to the pain on Asian economies, many of which are already wary of the fallout from sluggish Chinese growth,” he said.
Japan’s final au Jibun Bank Japan manufacturing PMI rose to 49.8 in August, contracting for a second straight month but less sharply than in July when the index reached 49.1.
South Korea’s PMI stood at 51.9 in August, up from 51.4 in July, due in part to strong customer confidence and new orders in the domestic market, the private survey showed.
Indonesia’s PMI fell to 48.9 from 49.3 in July, the surveys showed.
India’s manufacturing activity growth eased to a three-month low in August as demand softened significantly, casting another shadow over the otherwise robust economic outlook.
The International Monetary Fund anticipates a soft landing for Asia’s economies as moderating inflation creates room for central banks to ease monetary policies to support growth. It predicts growth in the region to slow from five per cent in 2023 to 4.5 per cent in 2024 and 4.3 per cent in 2025.
