Asia's export powerhouses face manufacturing slump amidst weak demand

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Asia's export powerhouses face manufacturing slump amidst weak demand

Asia's export powerhouses face manufacturing slump amidst weak demand

Industry News
Sep 04,23

According to manufacturing purchasing managers' surveys released by S&P Global and au Jibun Bank, factories in North Asia witnessed declines in new orders, production, and export sales.

Asia's export powerhouses face manufacturing slump amidst weak demand

In August, manufacturing activity in Asia's major export-driven economies continued to decline due to persistently weak demand in crucial trade markets, notably China.

According to manufacturing purchasing managers' surveys released by S&P Global and au Jibun Bank, factories in North Asia witnessed declines in new orders, production, and export sales.

Taiwan, a key indicator for global trade, reported a relatively unchanged purchasing managers' index (PMI) of 44.3 last month, compared to 44.1 in July. Meanwhile, South Korea's PMI dropped from 49.4 to 48.9 during the same period. Seoul also reported a discouraging reading on industrial production, revealing a larger-than-anticipated decline in July, marking a prolonged period of output contraction.

Japan's PMI remained stagnant at 49.6, staying below the critical 50 mark that separates expansion from contraction.

Even Southeast Asia, which had been a bright spot until recently, began to experience the negative sentiment affecting its factories. Both the Philippines and Thailand recorded PMIs in the red for the first time since 2021, as they scaled back on new orders due to disappointing demand. Malaysia's PMI remained unchanged at 47.8, while Indonesia was an outlier with the region's highest reading at 53.9.

Despite increasing signs of a soft landing in the US, the latest data suggests that a quick recovery for the region is unlikely. The persistent weakness in goods trade is further compounded by the potential for higher borrowing costs in the US and Europe.

Additionally, China's economic slowdown is significantly impacting export demand in the region, given that many Asian economies rely on China as their primary trading partner. China's manufacturing activity declined for the fifth consecutive month in August, although slight improvements in new orders and output provide some hope that the worst of the factory slump may be easing.

The challenges facing the region are intensifying. Japan is grappling with rising raw material prices and labour costs, while South Korea faces renewed shipping delays and semiconductor shortages, as reported by S&P Global. In Taiwan, companies are becoming more pessimistic about the next 12 months, leading to reductions in inventories and staff numbers in anticipation of a weaker market ahead.