Asia’s factories signal more pain as China recovery falters

SINGAPORE: Asia’s factories saw further easing in demand in May as China’s faltering recovery weighed on a region already smarting from a global trade downturn.

Purchasing managers indexes for export powerhouse Taiwan dropped to 44.3 from 47.1 in the previous month, while Vietnam registered the lowest reading since September 2021, according to S&P Global on Friday. South Korea’s factory gauge ticked up marginally in May although still remaining very much in contraction territory. A reading above 50 signals expansion and below that a contraction.

New orders and output fell across most Asian markets, with Japan a rare exception as factory activity reversed a decline for the first time since October 2022. The au Jibun Bank Japan Manufacturing Purchasing Managers’ Index for the country rose to 50.6 from 49.5 in April.

The data largely add to the gloomy economic picture from China, where manufacturing activity slipped deeper into contraction territory last month and services expansion eased. Far from gaining from the reopening of the world’s number-two economy, it looks like much of its regional trading partners are set to see the negative effects of weak Chinese growth. 

“Lower customer demand across key export markets such as mainland China, Europe and the United States continued to act as a drag on the sector’s performance,” according to Annabel Fiddes, economics associate director at S&P Global Market Intelligence, who said the data likely signals a disappointing second-quarter performance.

Even for Japan, despite higher levels of new work, the latest data indicated another solid decrease in purchasing activity, according to a statement. 

The string of Asian factory data follow Wednesday’s print that showed China’s May manufacturing PMI fell to 48.8 from 49.2 in April. It signals the foundation for China’s economic recovery is not yet solid, according to the National Bureau of Statistics. 

While factories in Asia’s north bore the brunt of the economic pain, those in the south presented a mixed picture. Thailand, Southeast Asia’s second-largest economy, saw strong production growth and improved activity although overall business confidence dipped to a 15-month low. 

Activity in the Philippines increased from April’s eight-month low of 51.4 to 52.2 in May. Malaysia’s gauge declined to 47.8 from 48.8 in April, with weak demand leading to stronger moderation in production.