Slumping demand for technology and semiconductors is hammering exports from Asia’s northeast manufacturing powerhouses including South Korea, Taiwan and Japan, and weighing on sentiment among producers.
FREMONT, CA: Due to the Ukraine crisis's effects, the manufacturing sector continued to weaken in Europe last month, while companies in Asia showed a mixed picture.
EU's purchasing managers index, a measure of private-sector activity, dropped from 49.6 in August to 48.4 this month. That was the third consecutive month below the 50-point barrier that separates expansion from contraction and is marginally lower than S&P Global's first reading.
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Readings for the four largest economies in the euro area were likewise below this critical level, indicating the bleak picture for the area most severely impacted by the conflict on its eastern border. The likelihood of a recession in the bloc rises as power constraints become a greater danger.
Chris Williamson, an economist at S&P Global, stated on Monday, “The unpleasant combination of a manufacturing sector in recession and rising inflationary pressures will add further to concerns about the prospects for the eurozone economy." Things appear to be getting worse with orders declining at a noticeably steeper rate than reduced output.
Most Southeast Asia's indicators showed improvement, with Indonesia matching its best level from January with 53.7. In statistics going back to 2016, Thailand's reading was at an all-time high, and in September, the Philippines also saw an increase. Malaysia was a rare weakening in Southeast Asia, slipping to 49.1 after 50.3 in August.
In September, PMIs in North Asia demonstrated more despair. According to S&P Global, statistics of Taiwan and Japan fell from the previous month, with Taiwan's PMI falling to 42.2, its lowest level since the pandemic-era low in May 2020. The PMI for South Korea will be released on Tuesday. The industrial data are one aspect of a more gloomy forecast for the world economy, with a wave of interest rate increases still needed to stem excessive inflation and growing growth concerns.
Technology and chip demand is falling, which is hurting exports from northeast Asian manufacturing giants like South Korea, Taiwan, and Japan, as well as producers' morale. Large Japanese manufacturers' confidence unexpectedly declined for three consecutive quarters due to the yen's quick devaluation and deteriorating global economic outlook. According to the data, a sentiment indicator among the major manufacturers in the nation dropped from 9 to 8 in September.
Businesses do not anticipate improvement anytime soon, as company optimism for the coming year fell to its second-lowest level ever, according to a release from Annabel Fiddes, associate director of economics at S&P Global Market Intelligence. The fear is that the world economy will continue to deteriorate, and demand in important countries in Asia, Europe, and the US will drop in the coming months.
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