Asia’s factories stumble as US trade deal fails to help
Asia’s manufacturing giants grappled with weak demand in November and declines in factory activity continued as progress in U.S. trade negotiations failed to translate into a significant improvement in orders.
Multiple purchasing manager indexes (PMIs) on Monday showed varying conditions across the region; While China, Japan, South Korea and Taiwan all reported declines in activity, Southeast Asian economies mostly posted growth.
Private sector PMI data showed factory activity began contracting again in China, the world’s biggest producer, a day after Beijing’s official measure showed activity falling for an eighth consecutive month, albeit at a slower pace.
“Container volumes at Chinese ports were little changed last month compared to October. The recovery in demand did little to support output despite already high inventory levels – the production component fell to a four-month low,” said Zichun Huang, China economist at Capital Economics.
“And while the output price component rose slightly, it remained at a low level, indicating persistent deflationary pressures.”
Across Asia this year, businesses in leading exporting countries are scrambling to navigate the uncertainty created by U.S. President Donald Trump’s sweeping tariffs.
Although Trump’s trade deals with countries such as Japan and South Korea and easing tensions with China have given companies some confidence, many are still trying to adapt to the new US trade reality.
Japan’s PMI showed that new orders continued to decline, with the decline stretching over two and a half years due to factors such as a sluggish global business environment, tightening customer budgets and declining capital investment.
Official data on Monday also showed that Japanese companies’ spending on plant and equipment rose 2.9 percent in the July-September period compared to the same period a year earlier, slowing from the previous quarter.
South Korea’s factory activity contracted for a second month in November, but a finalized trade deal with the United States provided some clarity for manufacturers.
Separate data showed Korean exports rose for a sixth consecutive month in November, beating market expectations, as chip sales reached a record high on strong technology demand and autos also rebounded after a US trade deal.
Taiwan’s PMI showed factory activity continuing to decline but at a slower pace.
Meanwhile, Asia’s emerging market manufacturers have lagged behind, with Indonesia and Vietnam reporting rapid growth in factory activity and Malaysia returning to growth.
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