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Asia’s factory activity weakened in September as Chinese demand faltered and global economic uncertainty persisted. Private surveys reveal that manufacturing across the region faces headwinds, prompting policymakers to rely on China’s recent stimulus efforts, including rate cuts and liquidity boosts, to revive growth.
Policymakers Under Pressure as China's Stimulus Aims to Bolster Asia's Struggling Manufacturing Sector
Private surveys indicate that Asia's factory activity declined in September due to sluggish Chinese demand and global economic uncertainty. This has placed policymakers under pressure to support their fragile economies.
The forthcoming months may provide some respite to the region's manufacturers due to the aggressivestimulus that Chinese authorities have implemented in the past week. This stimulus includes reduced interest rates and liquidity in the banking system.
On October 1, purchasing managers' index (PMI) surveys indicated that factory activity in Japan decreased in September and expanded at a slower pace in Taiwan. These findings underscore the impact of lackluster global demand on Asian exporters.
South Korea's export growth decelerated in September, with shipments to the world's largest economy scarcely increasing, as evidenced by data released on October 1. According to Reuters, this decline is indicative of the expanding repercussions of the slowing U.S. economy.
The Caixin/S&P Global manufacturing PMI, published on September 30, indicated that factories in China were experiencing difficulty making progress. The reading fell from 50.4 in the previous month to 49.3 in September, the lowest since July last year.
The situation in Japan was comparable, as the country depends on exports to stimulate economic development in the face of low consumption. The final au Jibun Bank Japan PMI decreased from 49.8 in August to 49.7 in September, remaining below the 50.0 threshold that distinguishes growth from contraction for the third consecutive month.
According to Usamah Bhatti of S&P Global Market Intelligence, the Japan PMI survey revealed "muted trends across the manufacturing industry."
Taiwan’s Manufacturing Slows as IMF Forecasts Moderate Growth for Asia Amid Easing Inflation
In September, Taiwan's PMI decreased from 51.5 in August to 50.8. The surveys indicated that manufacturing activity declined in Vietnam, Malaysia, and Indonesia.
As inflation moderates, the International Monetary Fund (IMF) predicts that Asia's economies will experience a gentle landing, allowing central banks to relax their monetary policies to stimulate development. It anticipates that the region's growth rate will decrease from 5% in 2023 to 4.5% this year and 4.3% in 2025.
