Manufacturers struggle with tepid demand
Asia's manufacturers are continuing to struggle in the face of tepid demand from the United States and Europe, according to business surveys and data releases today that underlined the fragility of the global economy.
Equity and commodity markets slipped in Asia, where China's official manufacturing purchasing managers' index (PMI) showed factory activity contracted for a second straight month in September and a survey of Japan's big manufacturers showed sentiment worsening over the past three months.
Adding to signs that the region's vast factory sector is flagging in the face of strong global headwinds, Taiwan's PMI fell to its lowest in 10months and South Korea reported a small year-on-year decline in exports.
"I don't see troubles stabilising as yet. It will take a while longer until global demand shows signs of stabilisation," said Saktiandi Supaat, foreign exchange research head at Maybank in Singapore.
The China survey, the most closely watched by investors, underscored expectations that the motor of the global economy in recent years almost certainly endured a seventh straight quarter of slowing growth.
Overall, September's manufacturing PMI rose to 49.8 in September from 49.2 in August, which had been the lowest reading since November 2011. A PMI reading above 50 indicates expansion and below 50 contraction.
"The data continues to reinforce the hard landing that we have predicted for China, because this is the second consecutive month of a sub-50 reading," said Prakash Sakpal of ING in Singapore, which forecasts China's economic growth will be close to 7 per cent in both the third and fourth quarters of this year.
The official data followed a private-sector PMI survey on Saturday by HSBC that showed overall factory activity shrank for an 11th consecutive month in September.
Two cuts to interest rates, an easing of compulsory bank reserve requirements that freed about 1.2 trillion yuan ($190 billion) for lending and approval of more than $150 billion worth of infrastructure projects have so far failed to arrest the decline in China's overall growth.
China's annual economic growth could ease to 7.4 per cent in the third quarter, the seventh consecutive quarter of slowdown, before picking up to 7.6 per cent in the final three months, according to the latest Reuters poll. That would leave 2012 growth below 8 per cent, a level not seen since 1999.
The global currents dragging on China are also being felt in its next largest rival Japan, where the quarterly Bank of Japan "tankan" survey of business sentiment underscored the central bank's view that growth in the export reliant economy will stall in the remainder of the financial year to March 2013.