China slowdown, Euro crisis takes toll on Asia's exports

03-Aug-2012

Asia's factories were battered by weak export orders last month as fallout from the deepening euro zone debt crisis and China's slowdown cascaded across the region.
Even manufacturing output in Singapore, a bright spot in the region in recent months, ran out of steam as global economic growth stalls.

The Purchasing Managers' Index (PMI), a key barometre of factory activity, shrank last month for the first time since April.

It dipped to 49.8 last month, down from 50.4 in both May and June. A reading above 50 signals expansion, while one below 50 indicates contraction.

Export orders sank across the globe last month, underlining the extent of the global slowdown.

The euro zone's factory PMI fell to its lowest point since June 2009 as its debt crisis bit hard while Britain posted its weakest reading in three years. The United States saw manufacturing shrink for the second straight month.

In Asia, PMIs across Japan, South Korea and Taiwan also contracted.

Even Asia's biggest economies China and India, which had seemed more resilient, saw growth falter. In India, factory activity grew at its slowest pace in eight months. In China, the mainstay of Asian growth, the official PMI came in at 50.1 - barely expanding, and an eight-month low.

"The euro zone continues to struggle with the debt crisis, while the world economy is slowing down. This last piece of information should give policymakers food for thought," said Peter Vanden Houte at ING, in a Reuters report.

OCBC economist Selena Ling said markets would be looking at major central banks to see "what rabbit they can pull out of their hat" to stimulate growth.
Investors were focusing on the US Federal Reserve, which wrapped up a two-day meeting overnight, in hopes of a third wave of quantitative easing - effectively printing more money.

In Singapore, electronics was the main culprit for the PMI fall here as it is a key pillar of manufacturing. Manufacturing makes up nearly a quarter of the economy.

Barclays Capital economist Leong Wai Ho said the slump was not necessarily a "doomsday signal". He expects a modest pickup once conditions normalise, adding that important tech product launches such as Windows 8 and the iPhone 5 later this year bode well for the electronics sector.