- The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) for China’s private sector stayed steady at 50.8 in January, denoting growth, contrary to an official survey depicting continuous contraction.
- Asian economies exhibit mixed picture; South Korea’s manufacturing sector improves due to escalating demand from major markets like the US and China, while Philippines, Taiwan, and Malaysia show slower development or decline.
- Despite weak domestic and external demand in China, experts believe the U.S resilience helps offset the adverse effects on countries like South Korea.
- The manufacturing industry in Japan faces an 8-month consecutive slump due to reduced new orders and output, with concerns raised over the impact of Daihatsu’s production suspension.
- On the other end, India witnessed an impressive growth in manufacturing in January, reporting the quickest expansion in 4 months owing to strong demand.
- The International Monetary Fund (IMF) anticipates Asia to expand by 4.5% this year, encouraged by expected stimulus measures in China and strong U.S demand. However, the economic recovery is expected to vary across countries.
PMI and Asian economies
The Caixin/S&P Global manufacturing PMI of China’s private sector remained steady at 50.8 in January, surpassing the 50-point mark that differentiates between growth and dependency, contrary to a formal survey revealing a contraction in manufacturing activity for the fourth consecutive month. Furthermore, the economy appears to be underperforming, fueling expectations for additional policy backing measures this year.
Performance of Asian Economies
Asian economies exhibited a mixed picture. While activity decline was observed in Taiwan and Malaysia and lesser growth in the Philippines, South Korea’s factory industry expanded for the first time in 19 months due to increased goods demand from the US and China.
Repercussions of Weak Chinese Demand
According to Toru Nishihama, Chief Emerging Market Economist at Dai-ichi Life Research Institute, resilient U.S. exports have offset the negative impact of weak Chinese demand on countries like South Korea. However, the weak Chinese demand, domestically and externally, leaves the global economy without one of its critical growth propellers, painting a flurry picture for Asian economies.
Manufacturing Challenges in Japan
In contrast, Japan is experiencing a decline in manufacturing activity for the eighth month in a row due to weak output and new orders. Concerns have been raised over the potential impact of production suspension at Daihatsu, a part of the automobile giant Toyota Motor (NYSE:) Corp.
Toyota’s production plan heavily influences Japan’s economy, owing to its reach to numerous parts suppliers across the nation.
Indian Manufacturing Sector’s Growth
Other countries, like India, are witnessing substantial improvements. Manufacturing activity in India increased rapidly in January, expanding at its fastest rate in four months due to robust demand.
IMF’s growth outlook for Asia
On Wednesday, the IMF revised up its growth forecast for Asia, predicting a 4.5% expansion this year, mainly driven by expected stimulus measures in China and strong US demand. However, the organization added that the recovery would be non-uniform across economies, with Japan likely seeing a slowed growth rate of 0.9%, in contrast to the projected 6.5% expansion in India.
This economic climate could significantly influence the forex market, potentially impacting various trading assets. However, precise effects depend on several factors, including policy decisions in major economies.