China leads slump in Asian factory activity

A drilling machine production line at a factory in Zhangjiakou, Hebei province. In China, the Caixin Media and IHS Markit Purchasing Managers' Index fell to 49.7 from 50.2, its lowest reading since May 2017. That confirms a trend seen in the official
A drilling machine production line at a factory in Zhangjiakou, Hebei province. In China, the Caixin Media and IHS Markit Purchasing Managers' Index fell to 49.7 from 50.2, its lowest reading since May 2017. That confirms a trend seen in the official PMI on Monday, which showed a drop to 49.4 last month, the weakest since early 2016.PHOTO: REUTERS

Sino-US trade war, fading tech boom blamed for region's falling PMIs

HONG KONG • Factory conditions across some of Asia's most export-oriented economies slumped last month, hit by the US-China trade war and a fading technology boom.

In China, the Caixin Media and IHS Markit Purchasing Managers' Index (PMI) fell to 49.7 from 50.2, its lowest reading since May 2017, reports showed yesterday.

That confirms a trend seen in the official PMI on Monday, which showed a drop to 49.4 last month, the weakest since early 2016. A reading below 50 signals contraction.

Asian stocks fell and US futures and oil pared gains.

"The PMIs are signalling trouble ahead," said economist Chua Hak Bin at Maybank Kim Eng Research in Singapore.

"There have been some healthy trade numbers in some countries, but this is probably short-lived."

Taiwan's Nikkei and IHS Markit manufacturing PMI fell to 47.7 last month from 48.4 in November, down from 56.6 a year earlier.

That is partly due to a fall in demand for machinery and electronics goods, along with information and communications equipment, amid slowing orders for new smartphones and the simmering trade war.

Malaysia's PMI fell to 46.8 from 48.2, its lowest reading since the series began. New orders were at their weakest since May.

South Korea's PMI remained in contractionary territory for the second consecutive month even as the overall reading nudged higher. The manufacturing nation - a bellwether for global trade - saw exports fall last month.

There were signs of softness across the rest of the region too. Vietnam's PMI fell to 53.8, while the Philippines' PMI fell to 53.2.

In export-reliant Singapore, economic growth slowed to an annualised 1.6 per cent in the final quarter of last year, according to data released yesterday. Indonesia bucked the trend, with its PMI rising to 51.2.

The readings show how the ongoing trade war between the United States and China is hurting demand across Asia's manufacturing hubs.

While US President Donald Trump has signalled that negotiations with China are making progress, economists remain wary that the talks could stall ahead of a March 1 deadline.

Bloomberg's Global Trade Checkup is softening amid a fading rush to front-load export orders ahead of threatened tariffs, with economists warning 2019 will be the year the global economy feels the strain of trade tensions.

The picture in Asia matches an emerging trend in the US, where five Federal Reserve indexes of regional manufacturing all slumped last month, the first time they have fallen in unison since May 2016.

Worsening data could prompt Mr Trump and Chinese President Xi Jinping to agree on trade, Hong Kong-based chief Asia economist Xia Le at Banco Bilbao Vizcaya Argentaria told Bloomberg Television. "In China, they are facing a slowdown and according to recent data, this slowdown is worse than expected," he said.

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A version of this article appeared in the print edition of The Straits Times on January 03, 2019, with the headline 'China leads slump in Asian factory activity'. Print Edition | Subscribe