World Economy

Slow Performing Factories Affect Inflation

Slow Performing Factories Affect Inflation Slow Performing Factories Affect Inflation

Factory activity stumbled across much of Asia in September, with slowdowns in India, Japan and Taiwan and an outright decline in South Korea delivering a setback to hopes for a pick in world growth this year.

The lackluster performance helped lift the US dollar above 110.00 yen for the first time since mid-2008 while punishing commodity prices globally, a positive for consumers but also a force for disinflation, Reuters reported.

Indeed, subsiding price pressures was a feature of many of the manufacturing surveys out on Wednesday. Even Taiwan, one of the stronger economies in the region, reported output prices were cut for the eighth month in a row, while input inflation was the lowest in over a year.

“This should give the authorities plenty of room to keep policy accommodative to support growth,” said HSBC economist, John Zhu, a conclusion that goes for plenty of other countries.

China this week cut mortgage rates and downpayment levels for some home buyers for the first time since the global financial crisis, escalating efforts to boost an economy threatened by the sagging housing market.

Beijing has for some time now found it can no longer rely on exports and manufacturing as an engine for growth.

The official Purchasing Managers’ Index (PMI) of activity stayed stuck at 51.1 in September, only modestly above the 50 level that separates growth from contraction.

International investors have also been unsettled by reading pro-democracy protests in Hong Kong, watchful for any signs of fallout for China’s economy.

 Activities Wanes

In Japan, the economy is still struggling to get over a hike in the sale taxes that took effect five months ago.

The final Markit/JMMA Japan PMI eased to 51.7 in September, from 52.2 in August, and followed data showing industrial output, consumer spending and real wages all fell in August.

There was a glint of light as the Bank of Japan’s closely watched survey of business confidence improved for the first time in two quarters. Yet sentiment for the services sector still worsened.

All of which did little to relieve pressure on policymakers to expand stimulus ahead of Prime Minister Shinzo Abe’s decision by year-end on whether to proceed with a second tax hike.

Indian factory activity expanded at its slowest pace in nine months in September with an index reading of 51.0, down from 52.4 in August, breaking what had been a promising run.

Faring even worse was South Korea, where the HSBC/Markit PMI slid to a three-month trough of 48.8 in September, indicating activity contracted.