Manufacturing downturns gripped Asia and the euro zone in August,
surveys of purchasing executives showed, in the latest sign of weakness in the
global economy.
New orders dwindled in the euro
zone, suggesting the outlook for the 17-nation economy remains poor, while
activity in China's manufacturing sector—the engine for much of Asia's
economy—shrank at the fastest pace since the depth of the global financial
crisis.
The HSBC manufacturing Purchasing
Managers' Index for China fell to 47.6 from July's 49.3, the lowest since March
2009, figures released Monday show.
A number below 50 indicates
contraction, while above 50 indicates expansion. The figure followed an
official manufacturing PMI on Saturday that signaled a contraction for the
first time since November.
In the 17-nation euro zone, the
manufacturing Purchasing Managers' Index remained below 50 for a 13th month,
though the contraction was less deep than in July, data company Markit reported
Monday. The August index was 45.1, compared with 44 in July.
That and other economic
indicators could persuade the European Central Bank as soon as this week to
take action, such as cutting its benchmark interest rate, already at a record low,
or setting out plans to buy the government bonds of weaker member states,
including Spain.
"We expect the ECB to cut
interest rates from 0.75% to 0.50% by October, with a move very possible as
soon as its September meeting this Thursday," said Howard Archer,
economist at consultancy IHS Global Insight.
Manufacturing in South Korea,
whose exports have been hit hard by weakening foreign demand, shrank in August,
though less sharply than in July. In Taiwan, which also depends heavily on
consumers overseas, the pace of the contraction deepened.
India's manufacturing continued
to expand, but at a slower pace, while in Indonesia—Southeast Asia's biggest
economy—manufacturing picked up steam, offering a tentative positive signal for
Asia's prospects.
Asia's economy "is slowing,
perhaps a little bit more than people were planning for, but it's still
outgrowing every other part of the world," said Endre Pedersen, managing
director for fixed income at Manulife Asset Management, which manages $37 billion
in Asian fixed-income investments.
"I'm not expecting to see
continued further weakness into 2013. I think it will plateau out, probably
over the next few months," he said. "But obviously, I think it's much
more dependent on how it plays out in Europe and the U.S."
The euro-zone economy shrank 0.2%
in the second quarter from the first, or 0.7% at an annualized rate, while the
number of unemployed people in the bloc has climbed to a record of more than 18
million, or 11.3%, helping push consumer and business confidence down to a
three-year low.
"The [manufacturing] sector
is on course to act as a drag on gross domestic product in the third
quarter," said Rob Dobson, senior economist at Markit, adding that
improvement is unlikely until "regional structural issues are addressed
and the broader global backdrop brightens."
The pace of manufacturing decline
slowed in the Continent's biggest economy, Germany, and in France. But new
orders for German exports, the driving force of the country's economy, suffered
their steepest retreat since April 2009, underscoring the vulnerability of the
economy to global stagnation.
A weaker German economy could
curb the country's willingness to bankroll future euro-zone rescue efforts.
Markit's data showed manufacturing activity also fell month-to-month in France,
Spain and Greece in August—albeit at a lessened pace. The decline steepened in
Italy. Only Ireland showed month-to-month growth in its factory sector.
The outlook for Asia's exports
isn't good, considering the euro zone's troubles and only a patchy recovery in
the U.S., where Federal Reserve Chairman Ben Bernanke on Friday bolstered
expectations the Fed may pump more money into the economy to spur growth.
South Korea's exports—a
bellwether of Asia's export trends—fell 6.2% in August from a year earlier,
with shipments to nearly all major global markets falling.
The signals aren't all negative.
India's manufacturing continued to expand, though the HSBC PMI ticked down to
52.8 in August from 52.9 in July. There also were signs of strength in China
outside the manufacturing sector. The official nonmanufacturing PMI, which
includes retail, aviation, software, real estate and construction, rose to 56.3
in August from 55.6.
In Indonesia, HSBC's
manufacturing PMI edged higher, to 51.6 in August from 51.4 in July, with
export orders falling at a slower pace as the percentage of respondents who saw
higher external orders nearly doubled.
"In light of the ongoing
deterioration in PMIs around the region, Indonesia's new export orders may also
be an important leading indicator of the strength of demand across broader
Asia—it is, after all, a key supplier of raw and intermediate goods to major
markets such as China," HSBC said.
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