Asian factories show tentative signs of recovery as China improves By Reuters

By Leica Kihara

TOKYO (Reuters) – Asian factories, including China’s manufacturing sector, showed signs of a tentative recovery in August and chipmakers benefited from firm demand, private surveys showed on Monday, but economic headwinds are looming.

Analysts say the prospect of slowing US growth, which could lead to interest rate cuts by the Federal Reserve this month, and uncertainty over the outcome of the US presidential election are clouding the economic outlook.

China’s Caixin/S&P Global purchasing managers’ index (PMI) rose to 50.4 in August from 49.8 in July, the private survey showed on Monday, beating analysts’ forecasts and crossing the 50 mark that separates growth from contraction.

The reading, which mainly covers smaller, export-oriented firms, shows a more upbeat outlook than an official PMI survey released on Saturday, which indicated a continued decline in manufacturing activity in August.

Factory activity in South Korea and Taiwan also expanded in August, while Japan saw a slower rate of contraction due to solid global demand for semiconductors.

Japanese manufacturers also benefited from a rebound in car production after a safety scandal prompted some factories to temporarily suspend production.

But manufacturing activity contracted in Malaysia and Indonesia, the surveys showed, underscoring the pain some of the region’s economies are facing from China’s prolonged slowdown.

“Chip-making countries are doing quite well, but China’s slowdown will continue to drag down Asia’s manufacturing activity for some time,” said Toru Nishihama, chief emerging markets economist at Dai-ichi Life Research Institute.

“Weakening US demand could add to the pain on Asian economies, many of which are already wary of the fallout from slow growth in China,” he said.

Jibun Bank Japan’s final manufacturing PMI rose to 49.8 in August, contracting for a second month in a row, but less sharply than in July, when the index reached 49.1.

South Korea’s PMI was 51.9 in August, up from 51.4 in July, on strong customer confidence and new domestic orders, the private survey showed.

Malaysia’s PMI stood at 49.7 in August, flat from the previous month, while Indonesia’s fell to 48.9 from 49.3 in July, the surveys showed.

The International Monetary Fund (IMF) anticipates a soft landing for Asia’s economies as moderating inflation creates room for central banks to ease monetary policies to support growth. Growth in the region is forecast to slow from 5% in 2023 to 4.5% this year and 4.3% in 2025.