Times of Oman

Factories in Asia struggle as global demand on the wane

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SYDNEY: Activity in China’s colossal factory sector shrank in October as global demand stuttered, reinforcin­g the case for more stimulus and questionin­g whether the United States Federal Reserve can be confident enough to raise US interest rates this year.

A crop of industry surveys on Monday pointed to another poor month for trade across Asia as activity contracted in South Korea, Taiwan and Malaysia. Only Japan showed any hint of growth, perhaps thanks to the persistent weakness of the yen.

The run of pedestrian results will focus attention on the US Institute for Supply Management (ISM) measure of manufactur­ing due later which is forecast to have flatlined in October. Indeed, analysts at Barclays see a risk the PMI could fall under 50.0 for the first time since 2012.

“A negative reading on the ISM would be consistent with our view of continued headwinds facing the US manufactur­ing sector from a strong dollar, weak foreign demand and lower energy prices,” they said in a note.

“We think that soft US inflation and ongoing turbulence in emerging markets will keep the Fed on hold this year.” The US central bank surprised markets last month by downplayin­g global growth worries while opening the door wide to a rate hike in December. Those optimists looking for signs of revival in Asia found slim pickings in the latest data.

China slowdown

Activity in China’s manufactur­ing sector unexpected­ly contracted in October for a third straight month, according to the official survey.

The Purchasing Managers’ Index (PMI) held at 49.8 in October, missing market hopes for a breakeven 50 reading, while new export orders shrank for the thirteenth month.

That was followed by the Caixin/ Markit China PMI which focuses on small and mid-sized companies. It edged up to 48.3 in October, from 47.2, but still pointed to an eighth month of contractio­n. Beijing has rolled out a raft of support steps to avert a sharper slowdown, including slashing interest rates six times since November, but the stimulus has been slower to take effect than in the past.

China’s woes are being felt among its neighbours. South Korea’s exports slumped the most in more than six years in October, with hefty drops in shipments to China, the United States and Europe. The Nikkei/Markit PMI for South Korea ticked down to 49.1 in October, and has not been above 50 since February.

 ?? – Bloomberg News ?? SLOWDOWN: Activity in China’s manufactur­ing sector unexpected­ly contracted in October for a third straight month.
– Bloomberg News SLOWDOWN: Activity in China’s manufactur­ing sector unexpected­ly contracted in October for a third straight month.

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