Asian factories show signs of recovery amid global uncertainty

September 02, 2024 (MLN): Asian factories, including China's manufacturing sector, showed signs of a tentative recovery in August and chip makers benefitted from firm demand, private surveys showed on Monday, but economic headwinds loom, as Reuters reported. 

Analysts say prospects of slowing U.S. growth, which is likely to lead to interest rate cuts by the Federal Reserve this month, and uncertainty over the outcome of the U.S. presidential election cloud the economic outlook, it added. 

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 on Monday, 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 Saturday, which indicated an ongoing decline in manufacturing activity in August.

Factory activity in South Korea and Taiwan 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 Malaysia and 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 Toru Nishihama, chief emerging market economist at Dai-ichi Life Research Institute.

"Slowing U.S. 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.

Malaysia's PMI stood at 49.7 in August, flat from the previous month, while that of Indonesia fell to 48.9 from 49.3 in July, the surveys showed.

The International Monetary Fund (IMF) 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 5% in 2023 to 4.5% this year and 4.3% in 2025.

Copyright Mettis Link News