Economies Send Slowdown Signals
Jimmy Hitipeuw | Senin, 4 Juli 2011 | 05:38 WIB
SINGAPORE, KOMPAS.com – Asia’s economy continued to gear down in June, with manufacturing activity in China slowing for a third straight month as price pressures eased, suggesting that Beijing’s efforts to reduce inflation are bearing fruit.
Purchasing manufacturers indexes for India and South Korea released Friday also slipped in June, while a Taiwan PMI plunged, with activity there registering the first contraction since October.
In Japan, a central-bank survey showed the biggest fall in business sentiment since the depths of the global financial crisis in early 2009, reflecting the hit from the March 11 earthquake.
The data together showed Asia’s economy continues to slow even as inflation remains a problem in many countries. They also suggest that tighter policy will remain a near-term priority for central banks in the region.
But the China data, the most closely watched, should quell fears for now about an abrupt correction that could lead to global economic shocks, economists said.
“Chinese manufacturers are going through a mild inventory de-stocking process,“ said Callum Henderson, global head of FX strategy at Standard Chartered Bank. The PMI data came in “slightly weaker than expected, but it’s happening at a very gradual pace, and talk about a hard landing is overdone.“
China’s official PMI fell to 50.9 in June from 52.0 in May, barely above the key 50 level. A separate China index, the HSBC PMI, fell to 50.1, from 51.6 in May.
A drop below 50 would indicate a contraction in manufacturing, a worrisome prospect for a global economy counting on Chinese growth. Asia’s economy led the recovery from the recent global slump, driven by loose monetary and fiscal policies and official efforts to keep Asian currencies weak to spur exports.
But the fast growth has stoked price pressures, and inflation has been the key worry for central banks throughout Asia during the past year. Central banks across the region have been tightening policy, with Taiwan the latest to do so with a rate increase Thursday.
China has tightened policy through a series of increases in banks’ capital requirements and lending rates. Friday’s data suggested the cooling may be starting to work on prices. The input prices subindex in June fell to 56.7 from 60.3 in May.
“This implies that policy tightening is working, pointing to a peak of inflation in the coming months,“ Hongbin Qu, HSBC chief economist for China, said in a statement.
But it may be too soon to infer that the PBOC will ease off. Ashley Davies, a senior economist at Commerzbank, noted that if businesses let reduced input costs improve their bottom lines rather than passing them on to customers, they won’t translate into a slower pace of CPI increases. “In the context of rising wages, that’s probably a more likely scenario,“ he said.
In Korea, consumer prices in June were up 4.4% from a year earlier, underscoring the challenge the Bank of Korea faces as it works to get inflation under control in a cooling economy.
Indian manufacturing activity fell to a nine-month low in June, with HSBC’s PMI falling to 55.3 from 57.5 in May. But input and output prices rose, underscoring entrenched inflationary pressures in Asia’s third biggest economy.
HSBC’s Korea manufacturing gauge slowed slightly to 51.13 in June from 51.24 the previous month. Its Taiwan PMI index dropped to 49.9 — contraction territory — from 54.9 in May.
Elsewhere in Asia, Thailand’s consumer price index for June was up 4.06% from a year earlier, slower than May’s 4.19% increase. Inflation also eased slightly in Indonesia, to 5.54% from 5.98%.
Currency markets were largely unperturbed by the data. The Australian dollar, which tends to be sensitive to Chinese economic data due to Australia’s heavy dependence on China for its exports, fell by a quarter-cent but quickly recovered.
And while the Bank of Japan’s tankan survey showed corporate sentiment worsening to minus 9 in the second quarter — worse than the expected minus 7 — from plus 6 in the first quarter, there was a positive signal: Big companies, led by auto makers, plan to boost capital spending by 4.2% in the fiscal year ending March 2012. The previous survey had forecast a 0.4% cut.
“Capital spending is a reflection of the corporate earnings outlook so the market positively views an aggressive stance by firms to use their ample cash flow for investment,“ said Fumiyuki Takahashi, an equity strategist at Barclays Capital Japan.
Wall Street Journal