Asian factories lost some momentum in May
Weakness may be temporary amid signs of better global economy
NEW DELHI: Factories across much of Asia ran into a soft patch in May as export demand slowed, but analysts said the weakness was likely to be temporary amid signs of steady improvement in the global economy.
The findings from private business surveys came a day after Moody’s Investors Service painted an upbeat picture of global growth.
The readings add to signs that Asian economies generally remained buoyant in the second quarter, with manufacturing activity continuing to improve – albeit at a more modest pace – and business confidence remaining strong overall.
Still, there were mixed readings on regional powerhouse China, with official data showing steady growth fuelled by an ongoing construction boom but a private survey pointing to the first contraction in activity in 11 months.
After battling a multi-year trade recession, Asian exports have seen a strong rebound this year, often led by electronics.
The tailwinds from Chinese commodities and tech products demand, however, appear to be fading.
Yet, Tim Condon, ING’s chief Asia economist, says the growth outlook for the region remains positive as strengthening economies in the United States, Japan and Germany would support shipments from the region.
“May figures are just a blip,” he said. “The hopes for cyclical recovery remains a positive theme, thanks to the strength of G3 economies.” Data from Japan backed that assessment as manufacturing activity grew at its fastest pace in three months in May.
The world’s third-largest economy grew at its fastest pace in a year in the first quarter, marking the longest period of expansion in a decade.
An increase in capital expenditure in the first quarter also adds to a raft of recent data pointing to economic expansion.
The cheerful figures led to a 1% gain in Japan’s Nikkei yesterday.
MSCI’s broadest index of AsiaPacific shares outside Japan, however, was flat after four sessions of losses as investors took profits after stocks hit a two-year high last week.
China’s main indexes fell after the more downbeat private Purchasing Managers’ Index (PMI) report. The blue-chip CSI300 index fell 0.1%, while the Shanghai Composite Index lost 0.5%.
Like Japan, Germany’s economy is also on an upswing.
Europe’s biggest economy defied increased political risks to post the strongest quarterly growth rate in a year in the last quarter.
Overall, European growth has outpaced that of the United States, but the US is rebounding after a soft start to the year.
With economic growth in the world’s largest economy seen between 2%-3.7% in the second quarter, up from 1.2% a quarter ago, the Federal Reserve is expected to raise interest rates later this month.
On Wednesday, Moody’s said G20 economies, which account for 78% of the global economy, is expected to grow 3.1% on year in 2017 and 2018, faster than 2.6% growth last year.
The agency also said the biggest risks to global growth, including protectionism and European Union exits, seemed to have subsided.
China, however, is widely expected to slow over the year due to reduced property-related investment as liquidity tightening measures of the central bank, including limits on home mortgage lending, take effect. — Reuters