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Trade Conflict Affects Asian Factory Output

Trade Conflict Affects Asian Factory OutputTrade Conflict Affects Asian Factory Output

Manufacturing activity across Asia slowed in July, deepening concerns about the region’s economic outlook as an intensifying trade conflict between the United States and China sent shudders through their trading partners.

A survey of purchasing managers released on Wednesday showed China’s manufacturing sector grew at its slowest pace in eight months in July, with new export orders suffering the worst slump since mid-2016, Reuters reported.

Similar surveys revealed slowing activity from Australia to Japan. The shipping container market, in which the vast majority of finished manufacturing goods are imported and exported, shows a similar picture: the Harpex container index has fallen by 10% from its highest levels since 2011 hit in June.

Factory activity in the eurozone, where tariff threats were on hold, was expected to keep up the pace. In the United States it was seen cooling slightly, but still strong enough for the Federal Reserve to stay on track for two rate hikes this year even if it was likely to hold rates steady this week.

Last month, China and the United States slapped tit-for-tat tariffs on $34 billion of each other’s goods and another round of tariffs on $16 billion is expected in August.

China’s Caixin/Markit Manufacturing Purchasing Managers’ index dropped to 50.8 from June’s 51.0, broadly in line with an official survey on Tuesday.

The headline number remained above the 50-point mark that separates growth from contraction for the 14th consecutive month, but a reading on new export orders showed a marked contraction at 48.4.

“China’s economy is on track to slow this quarter and next,” said Julian Evans-Pritchard, senior China economist at Capital Economics in Singapore.

 

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