At the beginning of the third quarter, manufacturing activity slowed, reflecting the persistently sluggish momentum in the global economy caused by weak demand for products in Asia’s key manufacturing regions. Nine private polls were made public on Tuesday, and they revealed that industrial activity fell in six Asian nations in July. Notably, China’s industrial industry suddenly entered its first three-month period of downturn.

A fall in industrial activity was also seen in nations including Japan, South Korea, Malaysia, Taiwan, and Vietnam. India, Indonesia, and the Philippines, on the other hand, shown signals of growth.

According to Capital Economics’ Shivaan Tandon, an emerging Asia economist, manufacturing purchasing managers’ index (PMI) readings in the majority of Emerging Asia were still in contractionary zone. The underlying indicators signal to further deterioration in the months to come, with declining new orders, dim job outlooks, and high inventory levels indicating muted manufacturing activity.

The lack of demand has also resulted in lower manufacturing costs, which may have lessened inflationary pressures and allowed several rising Asian nations to loosen their monetary policies.

Particularly impacted was Taiwan’s manufacturing sector, with its PMI falling to 44.1 in July, the worst drop since November 2022. Due to decreased demand across many countries, including Europe, Japan, mainland China, and the United States, new export business in Taiwan shrank at the fastest pace in six months.

Taiwan GDP down 3.02% in Q1 as economy sinks into recession - Nikkei AsiaSimilar decreases in production, new orders, and employment were seen in other East Asian nations including Vietnam and China. The Caixin/S&P PMI for China dropped to 49.2 in July, the lowest figure in three months, reflecting a decline in new orders received by factories.

Despite the difficult economic climate, lower manufacturing costs are a consequence of the poor demand for Asia’s industry output. At the beginning of the third quarter, input price inflation decreased in Japan, South Korea, and Taiwan, allowing manufacturers to lower sale prices to consumers.

The central banks in the area are probably going to start thinking about lowering interest rates shortly given the weakened pricing pressures and sluggish growth. According to the most recent official statistics from South Korea and Taiwan, inflation has slowed down, reinforcing the idea that pricing pressures would likely continue to ease in the near future. Asia’s industrial sector may experience further difficulties in the future due to uncertainty in the forecast for the world economy.


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