Asia's Manufacturing Activity Stagnates in October

By Leika Kihara

TOKYO (Reuters) – Asia's manufacturing activity stagnated in October as a rebound in China failed to give much of a boost to regional factories, private surveys showed. This poses a discouraging sign for policymakers bracing for a potential escalation of U.S.-China trade tensions.

Economic Outlook

The readings come as the International Monetary Fund (IMF) warned of rising risks to Asia's economic outlook stemming from trade fragmentation, China's property sector woes, and the potential for further market turbulence.

Factory activity shrank in Japan and South Korea due to weak domestic demand and slowing growth in U.S., European, and Chinese markets, as shown by the purchasing managers' index (PMI) surveys released on Friday.

China's Manufacturing Recovery

In a glimmer of hope, however, China's manufacturing activity swung back to growth in October, helped by a slew of stimulus measures rolled out by Beijing to bolster a fragile economy. The Caixin/S&P Global manufacturing PMI rose to 50.3 in October from 49.3 the previous month, beating analysts' forecasts of 49.7.

This reading echoed an official survey on Thursday, showing that China's manufacturing activity expanded for the first time since April, signaling the economy's stabilization. However, Krishna Srinivasan, director of the IMF's Asia and Pacific Department, warned that risks of deflation were rising in China and called for further steps to address its property sector troubles and boost consumption.

> "China has a huge bearing on what happens in Asia," he told Reuters on Friday. "When China slows, the rest of Asia slows," he added, suggesting that the country must shift from an investment and export-led model to a consumption-led model.

Regional Performance

Japan's final au Jibun Bank manufacturing PMI fell to 49.2 in October from 49.7 in September, indicating the fastest shrinkage in three months due to weak domestic and overseas demand. The index remained below the 50.0 threshold for the fourth consecutive month.

South Korea's PMI stood at 48.3 in October, unchanged from the previous month and shrinking for a second straight month, with output declining at the fastest rate in 16 months, according to a private survey.

Factory activity in October also shrank in Indonesia and Malaysia, but expanded in Taiwan and Vietnam, the surveys indicated.