Monday, September 16, 2019

Asian manufacturing sector still weak: report

Apr 29. 2019
Facebook Twitter

By The Nation

1,663 Viewed

Although the soft data covering Asia-Pacific manufacturing including Purchasing Managers' Indices (PMIs) showed a slight improvement in March, it is still too early to expect an imminent manufacturing recovery, said S&P Global Ratings in a report published on Monday titled “Asia-Pacific Economic Snapshots: Asian Manufacturing Recovery Not Imminent”.

 

 

Seasonal factors in the first quarter led to noisy activity data, including PMI numbers. Despite the improvement in PMI data, the region’s industrial production data continued to be weak. In addition, formal statistical tests suggest that PMI changes are not good predictors of changes in industrial production.

Two factors indicate that manufacturing still faces challenges. First, the electronics sector, which is influential in industrial production in many countries in Asia, is still weak. A build-up of inventories over the past year has led to oversupply on the market. Second, retail sales activity in the US and Europe has been moderate. The two regions are large consumers of Asian products.

Economic activity across the region is mixed. In Australia, residential construction is slowing due to weakness in the housing market. Household wealth effects are reducing private consumption. Business confidence remains resilient for now, signalling steady capital expenditure intentions for this year. The government budget unveiled some modest tax cuts but the overall impulse seems moderate.

“The Reserve Bank of Australia is likely to keep cash rates on hold, but a material decline in growth below the trend of about 2.6 per cent would lead to rate cuts later this year,” said Shaun Roache, S&P Global Ratings' Asia-Pacific chief economist.

Policy easing in China is gaining traction. S&P Global Ratings’ financial conditions index eased again in March and is now at its most supportive.

Tags:
Facebook Twitter
More in News
Editor’s Picks
Top News