Asian Economies Struggle Amid Falling Factory Activity, PMI Data Reveals


  • Purchasing Managers’ Indexes (PMIs) revealed declining factory activity in most Asian economies at the end of the previous year, with confidence generally waning.
  • South Korea’s and Taiwan’s tech-dominated economies continue to struggle, with factory activity falling and contraction extending, respectively.
  • Despite Beijing’s official PMI still indicating contraction, China’s Caixin PMI showed surprising acceleration of activity in December.
  • Economic prospects for China remain uncertain, affecting its major trading partners.
  • China’s manufacturing sector showed improvements in December with stable price levels and growing supply and demand, according to Wang Zhe of Caixin Insight Group.
  • Beijing implemented policies in recent months to bolster post-pandemic recovery, although challenges persist amid a property slump, local government debt risks, and soft global demand.
  • Factory sectors of Malaysia and Vietnam saw continued contraction, whereas slight acceleration occurred in Indonesia.
  • Recent indicators suggest a possible gain of momentum in the region’s post-pandemic recovery, with Singapore’s GDP increasing, boosted by improved construction and manufacturing sectors.

Details on the Asian Economic Situation

PMIs from S&P Global demonstrated a continued decrease in factory activity across several Asian countries at the end of the year. The region faces waning confidence amid these economic struggles.

Challenges within tech-heavy economies like South Korea and Taiwan persist. Korean factory activity slumped again, while Taiwan experienced contraction for the 19th consecutive month, as shown by PMI data.

Contrasting Developments in China

Contrarily, the Caixin PMI of China indicated an unexpected increase in activity for December. Yet, this stands in sharp contrast to the contraction consistently indicated by Beijing’s official PMI.

Wang Zhe, a senior economist from the Caixin Insight Group, stated that despite improved economic outlook in the manufacturing sector, employment remains a significant challenge. Firms expressed rising uncertainty about future, with caution permeating hiring practices, raw material acquisition, and inventory management.

Other Countries in Asia

The struggles are not just in China, South Korea, and Taiwan. Factory sectors in Malaysia and Vietnam are also suffering, whereas slight acceleration has been observed in Indonesia. PMIs for India and Japan will be revealed later this week.

Recovery Signs in the Region

Despite the majority of December’s PMIs indicating economic struggle, signs of post-pandemic recovery are emerging in the region. Notably, Singapore saw an acceleration in its GDP in the last quarter, assisted by strengthened construction and manufacturing.

South Korea’s December exports showed some improvement, albeit at a slowed pace, due to weakened Chinese demand offsetting strong global semiconductor sales.

The recent economic indicators in Asia could bring potential effects to forex trading and other asset classes. As stability seems to be reinstated slowly in Singapore and potentially other countries, it might influence equities and currencies tied to these regions and sectors.

PIP Penguin