Asian factories rev up in September ahead of year-end spending spree
SINGAPORE: Factories in Asia’s largest economies cranked up activity in September as a synchronised upswing in growth globally pointed to solid consumption of manufactured goods heading into the lucrative end-of-year shopping season.
However, pockets of weakness in regional economies are likely to keep Asian central banks slanted toward more accommodative monetary policy, even as their Western counterparts move to scale back stimulus.
China’s central bank on Saturday cut the amount of cash that some banks must hold as reserves for the first time since February 2016 in a bid to encourage more lending to struggling smaller firms and energize its lacklustre private sector.
The world’s second- largest economy has defied expectations for a slowdown this year, growing at a strong clip in the first half thanks to a construction boom. Beijing’s latest easing comes ahead of a key party gathering this month.
“It’s a solid backdrop for manufacturing in the region as we head toward the big shopping season,” said Rob Carnell, Asia’s head of research at ING.
That sentiment was backed by an off icial Purchasing Managers’ Index from China’s vast manufacturing sector, which showed activity last month grew at the fastest clip since 2012 on solid demand.
But cost pressures from high raw materials prices and continued underperformanceof smallerfirms mean some manufacturers are still struggling, which was reflected in a separate private survey of Chinese factories showing growth slowed in September.
In Japan, factory activity grew the fastest in four months, thanks to robust exports growth and underpinned improving economic momentum even though inflation remained tepid.
Meanwhile, a closely watched Bank of Japan survey showed big manufacturers have more confidence in business conditions than they have had for a decade, thanks to a weaker yen and robust global demand.
In South Korea, manufacturing activity expanded at the fastest pace in almost two years.
Indonesia, Southeast Asia’s biggest economy, also showed an improvement in factory growth but the pace was tepid and production contracted slightly.
Indonesia has cut interest rates twice this year in a bid to boost stubbornly weak domestic consumption, while India slashed rates once in August to spur growth and inflation.
Those moves, along with the BOJ’s commitment to maintain its ultra-low rates for the foreseeable future, marked a contrast to the West’s shift toward tighter policy, although analysts expect the extent of stimulus in Asia to be measured. — Reuters