Factory production in Asia fell sharply in October as demand for goods continued to weaken

The slowdown in growth in Asia is further evidence that world trade is decelerating markedly as inflation and interest rates soar and consumer spending in the US and Europe is subdued, the analysis said. South Korea's exports fell in October for the first time in two years, one of the clearest signs that the global economy is cooling.

Data released by the Korea Customs Administration on Tuesday (Nov. 1) showed that average daily shipments on weekdays in October fell 7.9% year-on-year, while overall exports fell 5.7%, a sharper-than-expected 2.1% decline.

The manufacturing Purchasing Managers' Index (PMI) for October showed the magnitude of the decline as South Korea's trade data came out. (The PMI index of 50 is the dividing line between prosperity and decline. A higher than 50 indicates that manufacturing activity has expanded from the previous month, and a lower than 50 indicates that manufacturing activity has contracted.)

In October, Japan's manufacturing PMI fell to 50.7 from 50.8 in September, the slowest expansion in the country since January last year; South Korea's PMI rose to 48.2 from 47.3, the fourth consecutive month of contraction in the country's factory activity; China In October, the PMI was 49.2, down 0.9 percentage points from September, returning to below the line of prosperity and decline.

While factory activity in Thailand continued to expand, its PMI fell the most in Asia, to 51.6 from 55.7, as selling prices rose at the fastest pace on record and global demand for commodities deteriorated. Growth in Indonesia and Vietnam also slowed in October. Manufacturing activity in Malaysia contracted further, with the PMI falling to 48.7 from 49.1 in September.

Meanwhile, India's PMI came in at 55.3 in October, up from 55.1 in September, the best reading in the region, as the country's manufacturers expect better sales, boosting employment and inventories.

Vietnam's manufacturing expansion has slowed in October, with the PMI slipping to 50.6 from 52.5 in September, still in the expansion zone, but new orders are on a downward trend.

Vietnamese factories are bracing for a challenging year-end season as orders from major markets such as the U.S. and Europe slumped, hampering their post-pandemic recovery, local media reported.

In the past few months, workers at a Binh Duong-based handbag maker have not worked overtime, with no extra work after an eight-hour shift. "Despite the approaching Christmas, orders are down 20-30% year-on-year," said the company's chairman.

Europe and the U.S. saw the biggest declines, he said, and other markets such as Canada, China, Japan and South Korea also reduced their purchases, with a customer who once ordered 10,000 now ordering 7,000.

A Ho Chi Minh City manufacturer that exports footwear to European countries also said its orders fell nearly 30 percent from last year. The company had already faced difficulties sourcing materials from other countries in August and September, before a drop in orders created more challenges for the company. With fewer orders, workers' incomes have fallen, making life more difficult.

Many other factories in Vietnam are facing a similar situation as consumers in Western countries tighten their spending amid rising inflation.

Vietnam's exports in September fell 14.3 percent from August, the second-lowest this year, according to the Vietnam National Bureau of Statistics. The report also said that in the third quarter, 65% of exporters saw a drop in new orders or were at the same level as the second quarter.

The International Monetary Fund (IMF) last week downgraded its growth forecast for Asia, as global monetary tightening, rising inflation due to the conflict in Russia and Ukraine and a slowdown in China's economy have dampened prospects for recovery in the region.

Source:https://www.sofreight.com/