factories decline — factories decline — Asia’s manufacturing powerhouses struggled with sluggish demand in November, extending declines in factory activity as progress in U.S. trade negotiations failed to translate into a significant recovery in orders.
- India's gross domestic product grew at its fastest pace in 18 months during the July-September period, driven by robust consumer spending.
A raft of purchasing managers’ indexes (PMIs) released on Monday illustrated diverging conditions across the region. While China, Japan, South Korea, and Taiwan reported declines, Southeast Asian economies demonstrated mostly positive growth.
Factories decline: China’s Manufacturing Contraction
In China, the world’s largest manufacturer, factory activity slipped back into contraction, according to a private-sector PMI. This followed Beijing’s official measure, which indicated that activity had fallen for the eighth consecutive month, although at a slower pace.
Zichun Huang, China economist at Capital Economics, noted, “Container throughput at Chinese ports was little changed last month compared to October. To the extent that demand did improve, it didn’t do much to support production amid already high inventory levels – the output component dropped to a four-month low.” He added that the output price component edged up slightly but remained at a low level, indicating persistent deflationary pressures.
Diverging Trends Across Asia
Despite the downturn reflected in the PMIs, Capital Economics highlighted a disconnect between these indexes and hard trade data from across Asia. “Exports from most of Asia have been surging in recent months, and we think the near-term outlook for export-driven manufacturing sectors in the region remains favourable,” stated Shivaan Tandon, Asia economist at Capital Economics.
This year, businesses in major exporting nations have been navigating the uncertainty created by U.S. President Donald Trump’s sweeping tariffs. Although trade deals with countries like Japan and South Korea have provided some confidence, many manufacturers are still adjusting to the new trade landscape.
Japan’s Prolonged Decline
Japan’s PMI showed a continued decline in new orders, extending the downturn to two-and-a-half years. This has been attributed to a sluggish global business environment, tighter client budgets, and subdued capital investment. Recent official data revealed that Japanese corporate spending on factories and equipment rose by 2.9% in the July-September period compared to the same time last year, although this growth rate has slowed from the previous quarter.
South Korea’s Mixed Signals
Factory activity in South Korea contracted for a second month in November, despite a finalised trade deal with the United States bringing some clarity for manufacturers. However, separate data indicated that Korean exports rose in November for the sixth consecutive month, surpassing market expectations. This growth was largely driven by record chip sales and a rebound in the auto sector following the trade agreement with the U.S.
Emerging Markets on the Rise
In contrast, Asia’s emerging-market manufacturers are outperforming their counterparts. Indonesia and Vietnam both reported brisk growth in factory activity, while Malaysia has bounced back to growth after a previous downturn. India, although experiencing a slowdown from October’s robust performance, still boasts a PMI well above those of its peers, supported by strong growth indicators in the country’s economy.
India’s gross domestic product grew at its fastest pace in 18 months during the July-September period, driven by robust consumer spending.
