ASIA: A ‘pick-up’ in Asia’s manufacturing activity is not expected anytime soon, Dai-ichi Life Research Institute’s chief emerging market economist Toru Nishihama said, highlighting the ‘quite high reciprocal tariffs’ that have hit the region, Reuters reported.
On Monday, private surveys revealed that manufacturing activity across Asia fell in May, weighed down by soft demand in China and the US tariffs on businesses.
Mr Nishihama noted that weak domestic demand in China is causing the country to flood the region with cheap exports, putting deflationary pressure on the region’s economies.
On Saturday, an official survey revealed that China’s manufacturing sector contracted in May for the second consecutive month.
Manufacturing activity in Japan and South Korea, both heavily reliant on trade, continued to shrink in May, with U.S. President Donald Trump’s automobile tariffs casting a cloud over their export outlook.
While the au Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) increased from 48.7 in April to 49.4 in May, it stayed below the 50 mark, indicating contraction for the 11th successive month, according to the bank’s press release on Monday.
South Korea’s PMI, at 47.7 in May, also stayed below the 50 mark for the fourth month due to weak demand and the impact of US tariffs, according to a survey by S&P Global.
Both countries’ economies shrank in the first quarter, as US tariffs and trade uncertainties weighed on exports and business activity. According to Reuters, there is “little sign” that this will improve soon.
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Factory activity also declined in other Asian economies. Private surveys showed that Vietnam, Indonesia, and Taiwan all experienced contractions in May.
Global trade tension re-escalated on Friday when US President Donald Trump accused China of violating a bilateral deal to reduce tariffs and announced the doubling of worldwide steel and aluminium tariffs to 50%. On Monday, Channel News Asia reported that China “firmly” rejected that it had violated a sweeping tariffs deal. China also accused the US of “seriously violating” their trade truce, as reported by The Guardian.
At the start of the year, the Singapore Manufacturing Federation (SMF) stated that the manufacturing outlook in the city-state is expected to be slightly better than last year, although growth will be uneven across different sectors.
However, with little progress in trade talks between Asian countries and the US, analysts said the ongoing uncertainty will likely keep companies from boosting production or spending. /TISG
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Read also: Trade costs force 42% of Singapore firms to raise prices, HSBC finds
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