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Asia’s factories falter

Updated July 02, 2019

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Factory activity shrank in most Asian countries in June as the simmering US-China trade conflict. — AFP/File
Factory activity shrank in most Asian countries in June as the simmering US-China trade conflict. — AFP/File

TOKYO: Factory activity shrank in most Asian countries in June as the simmering US-China trade conflict put further strains on the region’s manufacturing sector, keeping policymakers under pressure to deploy stronger steps to avert a global recession.

A series of predominantly downbeat business surveys and official indicators released on Monday followed the G20 summit in Osaka, Japan, where leaders on Saturday warned of slowing global growth and intensifying geopolitical and trade tensions. The US and China agreed at the summit to restart trade talks after President Donald Trump offered concessions including no new tariffs and an easing of restrictions on tech company Huawei, providing some relief to businesses and financial markets.

But analysts doubt the truce will lead to a sustained easing of tensions while lingering uncertainty could dampen corporate spending appetite and global growth.

“It’s too early to turn optimistic. The two countries just kicked the can down the road and there’s no knowing what could happen next,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo.

“Global manufacturing activity hasn’t hit bottom yet. US business confidence, particularly that of manufacturers, has been weakening and if this continues, it may hurt economies across the world.”

In China, Asia’s economic engine, the Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) came in at 49.4, falling short of market expectations and the worst reading since January.

It was the first time in four months that the keenly-watched index has fallen below the neutral 50 point-mark dividing expansion from contraction on a monthly basis.

Japan also saw manufacturing activity contract in June to hit a three-month low, offering fresh evidence of an economy under the pump as global demand weakens.

Separately, a Bank of Japan (BOJ) survey showed big manufacturers’ confidence hit a near three-year low, keeping its central bank under pressure to maintain or even ramp up a massive stimulus programme.

In South Korea, factory activity shrank at the

fastest pace in four months in June as the global trade slowdown deepened, prompting companies to cut production.

Published in Dawn, July 2nd, 2019