INTERACTIVE: Asia manufacturing slowdown continues in November

SINGAPORE (ICIS)–Asia’s manufacturing sector continued to slow down in November amid the trade tensions between the US and China, with business confidence in the region expected to remain subdued next year.

Shipping containers at the port of Qingdao in China (Source: Sipa Asia/REX/Shutterstock)

Out of 11 countries in northeast and southeast Asia whose November purchasing managers’ index (PMI) readings were tracked by ICIS, six recorded lower numbers from the previous month, while five had improvements, based on a combination of official and private survey results.

China, the world’s second largest economy and Asia’s biggest, posted an official PMI reading of 50.0, the minimum number indicating expansion, down from 50.2 in October.

PMI is a barometer of an economy’s manufacturing activity, with a reading above 50 indicating expansion and a reading below 50 denoting contraction.

Chinese private media group Caixin had a more upbeat manufacturing PMI reading for China at 50.2 in November, up from 50.1 in October.

However, the drop in Caixin’s sub-component for new export orders was the major concern as it suggests weakening exports ahead, said Singapore-based UOB Global Economics & Markets Research.

Singapore’s DBS Group Research in a note on Tuesday said that it expects continued slowing of growth momentum in China, with real GDP growth easing towards 6% in the first quarter of next year.

Continued weakening of retail sales, trade, and production momentum in China will weaken growth, with both credit growth and fixed asset investment weak but flat, it said.

“China’s policy makers will most likely counter this growth trajectory with further stimulus measures, in our view,” DBS said.

South Korea, which is the fourth largest economy in Asia and a major exporter to China, indicated a contraction in factory output in November, with its PMI reading falling to 48.6 from from 51.0.

Concerns about a global economic slowdown amid the US-China trade war have been hounding the financial and commodities markets.

The 90-day trade truce between the two economic giants on 1 December provided some much-need relief but markets have largely remained jittery.

Economies in the west fared better than expected in November, with the US and UK posting improved PMI readings.

The US Institute for Supply Management (ISM) manufacturing PMI beat expectations, rising to 59.3 in November from 57.7 in October, but IHS Markit’s November manufacturing PMI for the world’s largest economy slipped to 55.3 – the lowest since August, from 55.7 in October.

“These primarily showed patchy growth momentum across the world, which has undoubtedly been moderating since the third quarter,” said Malaysia-based HongLeong Bank.

The global economy lost steam in the third quarter following a strong performance in the second quarter.

Spain-based FocusEconomics forecasts the global economy to post a 3.2% growth in both the third and fourth quarters, down from 3.4% in the second quarter.

In 2019, the geopolitical agenda will be dominated by “ongoing US-China tensions, Brexit [British exit from EU] and changes within the EU and eurozone, the future of Iran’s and North Korea’s nuclear programmes, Russia-West tensions, and a particularly busy calendar of elections in Emerging Markets (EMs) and a handful of Developed States”, Fitch Solutions Macro Research said in a report on Tuesday.

“Overall, we are still in the midst of a transition to a more multi-polar world order, one in which the US, China, Russia, and to a lesser extent the EU and Japan are the most t powerful actors, but in which emerging powers such as India, Iran, Saudi Arabia, Turkey, and Brazil are increasingly important players,” it added.

Interactive and Focus article by Nurluqman Suratman

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