HONG KONG (Reuters) - Growth in China’s manufacturing output slowed in
October, threatening to chill activity across Asia, as tough steps to reduce
air pollution forced
factories to reduce production and a crackdown on
financial risk-taking weighed on smaller firms.
While business surveys on Wednesday suggested Asia’s export-driven
expansion still has legs, the readings are starting to reflect signs of fatigue
after an impressive sprint so far this year, suggesting regional economic
growth has peaked.
Still, barring any unexpected shocks, most analysts polled by Reuters
expect the global economy will remain on a roll for one more year, even if
China sees a gradual loss of momentum.[ECILT/WRAP]
In the West, similar preliminary surveys last week looked solid enough
not to derail plans by Federal Reserve to gradually reduce its balance sheet
and by the European Central Bank to slow bond buying. The Bank of England may
raise interest rates for the first time since 2007 on Thursday despite the
Brexit shock.
Taken together, the recent data points to global economic growth of
around 3.5 percent this year, analysts at Capital Economics said, adding the
world economy should be able to sustain that rate in 2018.
In China, a private survey showed manufacturing output rising at the
weakest pace in four months in October and companies continued to shed staff
despite a slight pick-up in domestic and export orders.
The Caixin/Markit Manufacturing Purchasing Manager’s Index (PMI) was
unchanged from September’s reading of 51.0, and in line with forecasts.
But production growth slowed markedly, nearing the 50-point threshold
that separates expansion from contraction.
Similar PMI surveys in Japan, South Korea, Indonesia, Taiwan, Vietnam and
India also suggested growth was starting to fade, while activity in Malaysia
contracted.
“We expect (China‘s) growth momentum to weaken in the coming months as
the drags from slower credit growth, reduced fiscal support post-Party Congress
and the environmental crackdown all intensify,” said Julian Evans-Pritchard,
China economist at Capital Economics.
The Caixin China report followed a similar official survey on Tuesday
which pointed to an unexpected cooldown in the manufacturing sector in the face
of a weakening property market and a crackdown on smog, which is forcing some
steel mills and factories in the northeast to curtail or halt production.
China’s economy has surprised with growth of nearly 7 percent this year,
driven by a renaissance in its “smokestack” industries, such as steel. It is
now almost sure to surpass the official target of around 6.5 percent.
But property and construction activity, two key growth drivers, are
feeling the weight of government measures to cool the heat in the housing
market. Higher borrowing costs are also hurting some firms as regulators clamp
down on riskier forms of lending.
Officials speaking at a twice-a-decade Communist Party congress last
month emphasized a shift in focus to high-quality rather than high-speed growth
and alluded to further efforts to contain excessive risk-taking in the
financial system, sending 10-year Chinese government bond yields to their
highest in three years.
“The Caixin PMI reflects companies that are smaller in scale and they are
at the center of the deleveraging reform,” said Iris Pang, Greater China
economist at ING.
“I don’t think this is a one-off.”
SUPER TECH
0 Comments