Daily Management Review

In Shadow Of Trump Protectionist Threat, Asian Factories Pick Up Steam


03/01/2017




In Shadow Of Trump Protectionist Threat, Asian Factories Pick Up Steam
Though the outlook for many of the region's export-reliant economies remained uncertain in the wake of U.S. President Donald Trump's protectionist stance, Asian factories extended a global manufacturing revival as activity picked up steam in February.
 
In a welcome sign for many of the companies tapped into the global supply chain, a broadly positive impulse for exports was shown in manufacturing surveys for Asia, including for its two biggest economies China and Japan.
 
"Encouragingly, the data indicated that the current upturn in demand remains broad-based across both domestic and international markets, while a further steep increase in purchasing activity raises the prospect of continued production growth in coming months," said Annabel Fiddes, economist at IHS Markit, referring to Taiwan's strong PMI reading.
 
However, for Asia and the rest of the world, Trump remained the great unknown risk factor.
 
The U.S. President did not announce anything new on trade in a key speech to Congress while outlining his plan for his first year in office.
 
With policymakers and investors remaining on edge until they see more clarity, and specific details, on U.S. economic policies, Trump's protectionist stance has rattled global markets.
 
A private survey in China showed factory activity expanded for an eighth consecutive month thanks to a pick up in export orders and therefore authorities in China, whom Trump last week labeled the "champions of currency manipulation", can take comfort from that survey.
 
Underscoring challenges for policymakers in China as an explosive rise in debt in recent years has stoked speculative asset bubbles, "bubble deflating" will remain a key theme at the upcoming National Congress, expects Zhou Hao, an economist at Commerzbank.
 
And in China, as authorities adopts a modest tightening bias in a bid to cool strong credit growth, that explains why Beijing plans to slightly lower its target for broad money supply growth to 12 percent.
 
Any tempering in activity in the U.S. could prove detrimental to some of the region's globe-trotting manufacturers and therefore the encouraging factory activity in Asia should also be squared off against rising interest rates in there.
 
With comments that suggested rate-setters were worried about waiting too long in the face of pending economic stimulus from Washington, a handful of Federal Reserve policymakers on Tuesday jolted markets into higher expectations for a March U.S. interest rate increase.
 
Noting the highest rate of growth since September 2014, China's exports signs of a pickup with the Caixin PMI sub-index for new export orders rising to 53.8 even though exports there have lagged its regional counterparts in recent months.
 
Supported by a pickup in global demand and from China, exports grew at their fastest pace in five years in South Korea which echoed the bounce in new orders. While semiconductor exports posted their best monthly performance on record, riding on a months-long rally in electronics, South Korea's biggest customer, rose for a fourth straight month, the trade ministry said.
 
"February data shows that there is a clear export resurgence, as exports in terms of both price and volume seem to be increasing," said Lee Sang-jae, an economist for Eugene Investment & Securities in Seoul.
 
But even as a pick up in manufacturing activity at its fastest pace in three years was accompanied by strong export orders, in Japan, the picture was mixed.
 
"Looking ahead, with domestic monetary policy set to remain loose and global growth likely to pick up a bit this year, we expect a gradual recovery in Asian manufacturing ahead," said Krystal Tan, Asia economist at Capital Economics
 
(Source:www.reuters.com) 






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