BEIJING - China’s factory activity shrank for the fifth straight month in February, with weak demand in the world’s No. 2 economy weighing on manufacturers across Asia.
The official manufacturing purchasing managers’ index (PMI) for China came in at 49.1 in February, the National Bureau of Statistics said on March 1. However, the Caixin PMI – a private survey that focuses on smaller firms – improved to 50.9.
Surveys of factory managers from elsewhere showed that manufacturers in North Asia cut output and new orders in February amid subdued customer spending both from domestic and international markets.
S&P Global data showed Taiwan’s PMI edging down to 48.6 in February from 48.8 the month prior, keeping it below the 50 waterline that separates expansion and contraction. It was the 21st straight month that manufacturing conditions had stayed in contraction territory in the trade-reliant economy.
Japan’s PMI also fell, dropping to 47.2 from 48, dragged down by its sharpest decline in exports in 11 months, according to data published by au Jibun Bank. Mainland China was cited as a key source of reduced international sales, along with weak orders from the United States and Europe. As a result, factories also cut employment levels and purchasing activity.
“Supply pressures were also evident, as delivery times reportedly lengthened to the greatest extent since February 2023,” said S&P Global Market Intelligence economist Usamah Bhatti about the Japan data.
“Anecdotal evidence suggests that logistical disruption caused by the situation in the Red Sea and the residual impacts of the Noto Peninsula earthquake weighed on suppliers.”
In South-east Asia, Thailand was the laggard, with its PMI worsening to 45.3 in February from 46.7 in January. New orders also declined at their sharpest pace since the Covid-19 pandemic. Malaysia and Myanmar remained in contraction territory, while only Indonesia, the Philippines and Vietnam posted above-50 readings in February.
The region saw inflationary pressures flare up anew. Factories were squeezed by rising prices of raw materials but were unable to pass on costs in full against the backdrop of tepid demand.
“Manufacturers will need to see stronger and sustained growth of new business before they can be confident enough to invest in inputs and start to raise their selling prices more in line with their own cost burdens,” said S&P Global economics director Andrew Harker of the Vietnam release.
The latest data comes amid fresh warnings from the World Trade Organisation (WTO) that global trade is performing weaker than expected in 2024 after unexpected economic headwinds and the re-emergence of protectionism. Demand remains modest among major economies, while shipping is disrupted as conflict and drought hit the key waterways of the Red Sea and the Panama Canal.
Merchandise trade likely fell short of the WTO’s forecast of 0.8 per cent growth in 2023 and this year’s estimate of a 3.3 per cent gain may prove to be too optimistic as well. BLOOMBERG
