Asia factories remain under pressure as global demand slows

Asia’s manufacturers remained under pressure in December as activity continued to contract under the weight of slowing global demand.
Several purchasing managers indexes were in negative territory across the region. The S&P Global PMI reading for Vietnam fell to 46.4 from 47.4 in November, its lowest reading since September 2021. A reading above 50 indicates expansion from the previous month, while anything below indicates contraction.
New orders for Vietnam also recorded the worst rate of contraction since September 2021. The country’s manufacturing sector is vulnerable to weakening orders in key markets such as China, Europe and the US, according to Andrew Harker, economics director at S&P Global Market Intelligence.

“Securing new work is likely to remain difficult until there is a pick-up in these markets, with a number of firms indicating that they expect demand to remain subdued in the near-term at least,” he said in a release on Vietnam.
Malaysia’s December PMI fell to 47.8 from 47.9, its lowest reading since August 2021.
Taiwan’s manufacturing PMI rose slightly to 44.6 in December from 41.6 the month before, indicating some easing of the ongoing downturn. Even so, the index has remained in contraction for seven consecutive months.
Bloomberg“There were widespread reports of weaker demand both at home and overseas, with firms commenting on reduced demand across Europe, mainland China and the US in particular,” said Annabel Fiddes, economics associate director at S&P Global Market Intelligence, in comments accompanying the data in Taiwan.

“Business confidence stayed firmly in negative territory, as manufacturers anticipate further cuts to output in the months ahead,” she said. “This seems increasingly likely if signs of spare capacity persist and global demand conditions fail to recover.”

The slump in China’s economy is of particular concern for trade in the region. The Caixin Manufacturing Purchasing Managers’ Index fell to 49 in December from November’s 49.4 amid the country’s sudden exit from Covid Zero.
That private gauge, published Tuesday, followed official data released over the weekend that showed the decline in manufacturing in the world’s second-largest economy worsened last month.
Encouragingly, manufacturers in China’s Caixin PMI survey expressed stronger optimism about the outlook for the year ahead.
“China’s growth prospects have been improving with the reopening accelerating,” said Zhou Hao, chief economist at Guotai Junan International Holdings, following the release of that China data. “Overall, the darkest hour is gone.”
Of the readings released Tuesday, the Philippines was a stand out, with activity rising to 53.1 from 52.7, its highest reading since June 2022.
The manufacturing sector was aided in its recovery in 2022 by the release of pent-up demand following the pandemic, said S&P economist Maryam Baluch in a statement on the Philippines.
“However, challenges in the form of supply-chain disruption and inflationary pressures remain an ongoing concern to the sector and could potentially threaten growth prospects in 2023,” Baluch said.
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