Asia’s Factories Lose Steam As Tariff Uncertainty Slows Recovery Across Major Economies
A series of purchasing managers' indexes (PMIs) released on Monday highlighted uneven conditions across the region, underscoring the challenges confronting exporters amid shifting global demand.
Asia's major manufacturing centres struggled to regain momentum in November, with fresh data showing that progress in US trade negotiations has yet to translate into a meaningful rebound in factory orders.
A series of purchasing managers' indexes (PMIs) released on Monday highlighted uneven conditions across the region, underscoring the challenges confronting exporters amid shifting global demand.
China, Japan, South Korea, and Taiwan all reported contractions in manufacturing activity, while several Southeast Asian economies recorded modest expansion, reported Reuters.
In China, the world's most influential manufacturing engine, output declined again. A private-sector PMI showed factory activity dipping back into contraction just a day after Beijing's official gauge posted its eighth consecutive monthly decline, albeit at a slower pace.
"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," said Zichun Huang, China economist at Capital Economics.
The economist added that while output prices edged slightly higher, they remained subdued, reinforcing concerns about ongoing deflationary pressures. Capital Economics analysts noted a disconnect between PMI readings and hard trade data, pointing out that Asian exports have surged in recent months.
"We think the near-term outlook for export-driven manufacturing sectors in the region remains favourable," said Shivaan Tandon, Asia economist at the firm.
Exporters Navigate Uncertain Trade Landscape
Across Asia, manufacturers have spent much of the year adjusting to the volatility sparked by US President Donald Trump's sweeping tariff actions. Although recent trade deals with Japan and South Korea and a softening of tensions with China have offered some relief, companies remain wary of the evolving US trade regime.
Japan continued to face pressure, with its PMI showing new orders shrinking for a two-and-a-half-year stretch. Firms attributed the weakness to a subdued global business environment, tighter budgets, and reduced capital expenditure. Separate data showed Japanese corporate spending on factories and equipment rising 2.9 per cent year-on-year in July-September, down from the previous quarter.
South Korea's manufacturing sector also contracted for a second straight month in November. Still, a recently concluded US-Korea trade deal offered some clarity for exporters. Meanwhile, new data revealed Korea's exports rose for the sixth consecutive month, driven by record-high chip sales and robust auto shipments following the agreement.
Taiwan's PMI showed a continued fall in factory activity, though the pace of decline eased.
Southeast Asia Outperforms, India Stays Resilient
Southeast Asia remained the region's bright spot. Indonesia and Vietnam both posted strong expansions in factory activity, while Malaysia returned to growth after a period of contraction.
India, too, continued to outperform most of its regional peers. Although the country's factory activity slowed from October's strong reading, the PMI remained firmly above that of neighbouring economies. The reading aligned with broader indicators showing robust economic growth.
Fresh GDP figures released on Friday revealed India grew at its fastest pace in 18 months during the July–September quarter, fuelled by strong consumer spending.
Trade Deals Offer Hope, But Demand Remains Fragile
While recent trade negotiations have offered manufacturers a degree of optimism, the latest PMI data underscores that Asia's factory sector is still waiting for demand to catch up. Exporters face an uncertain landscape shaped by shifting tariffs, fragile consumer sentiment, and uneven recovery across global markets.
For now, the region's manufacturing engines appear to be idling rather than accelerating, with policymakers and businesses alike hoping that the tentative progress in US trade talks will eventually translate into stronger, more sustained orders.
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