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Asia's Factories Slump as Trade War, Cooling Tech Boom Hits Home

Published 02/01/2019, 02:10 pm
Updated 02/01/2019, 02:49 pm
© Reuters.  Asia's Factories Slump as Trade War, Cooling Tech Boom Hits Home

© Reuters. Asia's Factories Slump as Trade War, Cooling Tech Boom Hits Home

(Bloomberg) -- Factory conditions across some of Asia’s most export-oriented economies slumped in December, hit by the U.S.-China trade war and a fading technology boom.

In China, the Caixin Media and IHS Markit PMI fell to 49.7 from 50.2, its lowest reading since May 2017. That confirms a trend seen in the official PMI on Monday, which showed a drop to 49.4 in December, the weakest since early 2016. A reading below 50 signals contraction.

Asian stocks fell and U.S. futures and oil pared gains. The steepest declines were in Hong Kong and China, while shares also fell in Australia and South Korea.

Taiwan’s Nikkei and IHS Markit manufacturing purchasing managers’ index fell to 47.7 in December from 48.4 in November, down from 56.6 a year earlier. That’s partly due to a fall in demand for machinery and electronics goods, along with information and communications equipment, amid slowing orders for new smartphones and the simmering trade war.

Malaysia’s PMI fell to 46.8 from 48.2, its lowest reading since the series began. New orders were at their weakest since May. South Korea’s PMI remained in contractionary territory for the second consecutive month even as the overall reading nudged higher. The manufacturing nation -- a bellwether for global trade -- saw exports fall in December.

There were signs of softness across the rest of the region too. Vietnam’s PMI fell to 53.8, while the Philippines PMI fell to 53.2. In export-reliant Singapore, economic growth slowed to an annualized 1.6 percent in the final quarter of 2018, according to data released on Wednesday. Indonesia bucked the trend, with its PMI rising to 51.2.

The readings show how the ongoing trade war between the U.S. and China is hurting demand across Asia’s manufacturing hubs. While President Donald Trump has signaled that negotiations with China are making progress, economists remain wary that the talks could stall ahead of a March 1. deadline.

The picture in Asia matches an emerging trend in the U.S., where five Federal Reserve indexes of regional manufacturing all slumped in December, the first time they’ve fallen in unison since May 2016.

Worsening data could prompt Trump and Xi to agree on trade, Xia Le, Hong Kong-based chief Asia economist at Banco Bilbao Vizcaya Argentaria SA. told Bloomberg Television.

"In China, they are facing a slowdown and according to recent data this slowdown is worse than expected."

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