September PMI Reports Show Bleak Outlook for Asia’s Economy

As surveys revealed on Monday, the economic outlook for most Asian countries is bleak as factory output dropped in September due to declining demand in China and advanced economies contributed to the pain from continuing cost pressures.

Falling manufacturing output was seen in Taiwan and Malaysia, while growth in Japan and Vietnam slowed compared to the previous month. This was due to the rising price of raw materials and the worsening economic outlook throughout the world, Reuters reported on Monday.

The manufacturing purchasing managers’ index (PMI) released by the Jibun Bank in Japan dropped to 50.8 in September from 51.5 in August, the lowest rate of expansion since January of last year.

The PMI for Taiwan fell to 42.2% in September from 42.7 in August, remaining below the 50 threshold that distinguishes expansion from contraction on a monthly basis.

The PMI for Vietnam dropped to 52.5 from 52.7 in August, and the PMI for Malaysia dropped to 49.1 from 50.3 in August.

In the meantime, China’s official PMI increased to 50.1 in September from 49.4 in August. However, a separate report showed that the Caixin/Markit manufacturing PMI dropped more than predicted to 48.1 in September from 49.5 in August.

“We’re seeing economic conditions deteriorate in China, the United States and Europe. That’s definitely weighing on Asian manufacturing activity,” said Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo.

“While supply disruptions may have run its course, Asia is now suffering from slumping global demand.”

Furthermore, rising inflation has compelled the US and European central banks to raise interest rates, raising concerns about a significant drop in global demand, which had supported Asian exports, added Reuters.