Asian Factories Improved Activity Before Shopping Season Begins

Large factories in Asia has been more active in September along with the rise in global growth with signs if a strong demand for manufactured goods which end the shopping season very well. Yet, some regional economies who are experiencing economic struggles keep the direction slightly bent as they need to implement softer monetary policy despite western countries have pushed back their stimulus.

The central bank of China has reduced the number of cash reserves for the first time since February 2016 which aims to make it more appealing for smaller lending companies and boost the stagnant private sector. The slowdown of their economy did not meet expectations even if they started the first half strongly. Although, they have plans of easing as they prepare ahead of the shopping season. This was supported by the official Purchasing Managers’ Index from China’s vast manufacturing sector whereby data shows a high demand in the previous month which have been the fastest rate since 2012.

However, the higher cost of raw materials has affected the performance of smaller companies which was exemplified in the separate private survey of factories indicating slowed growth for the month of September.

In Japan, the factory performance also accelerated at a quicker rate in four months because of strong demand in exports that affects the economic momentum despite the unchanged inflation rate. Moreover, the Bank of Japan reported that large manufacturers have gained more confidence in business situation over a decade, driven by the low value of yen and a strong global demand. Nevertheless, the BOJ plans to maintain their rates low.

Also, the Manufacturing business in South Korea grew at the fastest rate in less than two years.

Indonesia also demonstrated a rise in factory growth although at a slower rate and the production also declined. The country eased their interest rate twice this year hoping to improve the weak domestic consumption.

Yet, India cut its rates in August to stimulate growth and inflation.

Overall, it seems that these easing of the Asian nations is not really a major move but rather mere adjustments in policies compared to the Western countries as described by Rob Carnell, Asia’s head of research of ING.