BEIJING/TOKYO, Oct 1 (Reuters) - Asia's manufacturers are
continuing to struggle in the face of tepid demand from the
United States and Europe, according to business surveys and data
releases on Monday that underlined the fragility of the global
More data later is expected to confirm that the euro zone is
mired in recession while the prospects of a firmer U.S. recovery
remain delicately balanced.
Equity and commodity markets slipped in Asia, where China's
official manufacturing purchasing managers' index (PMI) showed
factory activity contracted for a second straight month in
September and a survey of Japan's big manufacturers showed
sentiment worsening over the past three months.
Adding to signs that the region's vast factory sector is
flagging in the face of strong global headwinds, Taiwan's PMI
fell to its lowest in 10 months and South Korea reported a small
year-on-year decline in exports.
"I don't see troubles stabilising as yet. It will take a
while longer until global demand shows signs of stabilisation,"
said Saktiandi Supaat, foreign exchange research head at Maybank
The China survey, the most closely watched by investors,
underscored expectations that the motor of the global economy in
recent years almost certainly endured a seventh straight quarter
of slowing growth.
Overall, September's manufacturing PMI rose to
49.8 in September from 49.2 in August, which had been the lowest
reading since November 2011. A PMI reading above 50 indicates
expansion and below 50 contraction.
"The data continues to reinforce the hard landing that we
have predicted for China, because this is the second consecutive
month of a sub-50 reading," said Prakash Sakpal of ING in
Singapore, which forecasts China's economic growth will be close
to 7 percent in both the third and fourth quarters of this year.
The official data followed a private-sector PMI survey on
Saturday by HSBC that showed overall factory activity shrank for
an 11th consecutive month in September.
Two cuts to interest rates, an easing of compulsory bank
reserve requirements that freed about 1.2 trillion yuan ($190
billion) for lending and approval of more than $150 billion
worth of infrastructure projects have so far failed to arrest
the decline in China's overall growth.
China's annual economic growth could ease to 7.4 percent in
the third quarter, the seventh consecutive quarter of slowdown,
before picking up to 7.6 percent in the final three months,
according to the latest Reuters poll. That would leave 2012
growth below 8 percent, a level not seen since 1999.
JAPAN GROWTH STALLING, AGAIN
The global currents dragging on China are also being felt in
its next largest rival Japan, where the quarterly Bank of Japan
"tankan" survey of business sentiment underscored the central
bank's view that growth in the export reliant economy will stall
in the remainder of the financial year to March 2013.
The headline sentiment index for big manufacturers fell by 2
points to minus 3 in September, compared with three months
earlier, showing the mood worsened in the last quarter after two
previous quarters of improvement.
"The details of the tankan show that indexes for demand are
weakening both domestically and overseas, reflecting the
slowdown in the global economy and its impact on Japan," said
Hiroaki Muto, senior economist at Sumitomo Mitsui Asset
Management in Tokyo.
The heaviest drag on the global economy has been from
Europe, where a festering three-year debt crisis is pulling the
euro zone back into recession and weakening demand for Asian
goods from one of the world's biggest economic blocs.
South Korea, home to export powerhouses such as Samsung
Electronics and Hyundai Motor Co,
reported an annual 5.1 percent fall in exports to the European
Union in September, while shipments to the United States fell
Overall exports from South Korea, the first major exporter
to release monthly trade data, fell 1.8 percent year-on-year.
They have fallen in seven of nine months this year.
Indonesia reported that exports fell in August from a year
earlier for the fifth straight month.
A factory PMI survey from Taiwan, another of East Asia's
export-focused tiger economies, showed a slump in new export
orders, with the pace of contraction the sharpest since November
PMI data was better from India, where growing orders and
output helped manufacturing activity expand at a steady pace in
September, although an increase in inventories could hurt growth
in the future.
The HSBC manufacturing purchasing managers' index, which
gauges business activity at India's factories, came in at 52.8
for September, unchanged from August's nine-month low but still
in expansionary territory.
"Economic activity in the manufacturing sector held steady,
supported by faster output growth and rising export orders,"
said Leif Eskesen, an HSBC economist. "However, a rise in
inventories may dampen output growth in coming months."
The U.S. Federal Reserve and European Central Bank have
unleashed massive monetary stimulus to prop up their economies,
but it is not clear yet whether the economic tide in the
industrialised world is starting to turn.
Manufacturing PMI surveys for the euro zone as a whole and
big European economies, due on Monday, are expected to show the
region's factory sector is still contracting.
A pair of reports from the U.S. Institute of Supply
Management, also out on Monday, are likely to paint a blurred
picture, with an expected small pick-up in manufacturing likely
to be offset by a dip in services.