TOKYO: Weak demand in China and growing global fallout from the Sino-US trade war took a heavier toll on factories across much of Asia in February, business surveys showed on Friday.
Activity in China’s vast manufacturing sector contracted for the third straight month, pointing to more strains on its major trading partners and raising questions over whether Beijing needs to do more to stabilize the slowing economy.
In many cases, business conditions were the worst Asian companies have faced since 2016, with demand weakening not only in China but globally.
Japan’s factory gauge fell at the sharpest pace in 2-1/2 years as slumping orders prompted plants to cut production, while separate data from South Korea showed its exports plummeted.
Readings from South Korea — the first economy in Asia to report trade data each month — were equally grim. Its exports contracted 11.1 per cent in February from a year earlier, their biggest drop in nearly three years, with shipments to major buyer China slumping 17.4 per cent.
Factory activity in Vietnam also slipped to the lowest level since March 2016. While output and new orders saw faster growth, an index on employment fell for the first time in almost three years.
India bucked the trend, with activity expanding at the fastest pace in over a year. The findings came a day after data showed Asia’s third-largest economy grew much less than expected in the final quarter of 2018.
“The weakening trend in Chinese import demand weighed heavily on exports across the rest of the region,” said Sian Fenner, lead Asia economist at Oxford Economics.
“We expect exports to remain under pressure,” Fenner said.
In China, both private and official factory gauges showed activity levels remained mired near three-year lows, with a government reading on Thursday pointing to the weakest export orders since the global financial crisis.
Factories also continued to shed jobs, a trend Beijing is closely watching as it weighs more support measures.
While there was a marginal pick-up in domestic orders in China, analysts said it was too early to tell if it was due to growth-boosting measures announced by Beijing in recent months or seasonal distortions linked to the long Lunar New Year holidays early in the year.
“The upshot is that it is probably too soon to call the bottom of (China’s) current economic cycle,” Julian Evans-Pritchard, senior China economist at Capital Economics, wrote in a note after the survey. “Indeed, we expect growth to continue to come under pressure until the middle of this year.” — Reuters
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