HONG KONG: Asia’s factories cranked up production in August as global demand remained strong, confounding expectations that growth may have peaked, but worries about China’s massive debt and monetary tightening in the West are likely to keep businesses and markets on edge for months to come.
Similar manufacturing activity surveys from Europe and the United States later on Friday are expected to show strong growth, too, paving the way for a gradual rollback of the radical stimulus introduced after the global financial crisis.
In China, manufacturing activity accelerated to a six-month high, buoyed by the sharpest increase in new export orders in seven years and higher prices, a private survey showed.
That echoed similarly robust official data on Thursday suggesting the industrial sector is continuing to prosper from a year-long, government-led building boom. In both cases, economists had expected growth rates to ease.
The third quarter is now looking strong enough that China could sustain much of the momentum from its forecast-beating 6.9 per cent growth in the first half of the year, despite a regulatory crackdown on riskier types of financing and debt and a slew of measures to cool its overheating property market. Indeed, ratings agency Moody’s Investors Service this week raised its growth forecasts for China, South Korea and Japan.
“The surveys point to resilient industrial activity last month,” said Julian Evans-Pritchard, China economist at Capital Economics.
Manufacturing also expanded solidly in the world’s No 3 economy, Japan, as domestic and export orders picked up. The pick-up in new business was generally more modest than in China, however, suggesting its economic growth may moderate from an eye-popping 4 per cent annualised rate in the second quarter.
Other Asian electronics producers were also still riding high.
Taiwan’s manufacturing survey saw the fastest growth in four months, while South Korea’s exports beat expectations and posted their longest run of growth in almost six years. South Korea is the first among major exporting countries to publish its monthly trade figures.
India’s activity also unexpectedly rebounded in August, in a sign there was light at the end of the tunnel, with the shock of last year’s demonetisation cash crunch and confusion over a new goods and services tax likely to ease in coming months. Data on Thursday showed Indian economic growth unexpectedly cooled in the June quarter to a three-year low of 5.7 per cent.
In China, the private Caixin/Markit survey showed new business grew at the strongest pace in more than three years in August. The manufacturing Purchasing Managers’ Index (PMI) rose to 51.6, from 51.1 in July. Levels above 50 suggest expansion.
Prices of industrial commodities and building materials, in particular, have surged in China this year largely due to the government’s hefty infrastructure spending and its efforts to reduce excess capacity by shutting inefficient mines and mills.
— Reuters
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