Posted on November 2, 2013
HONG KONG — The gradual recovery in the United States, Europe and China filtered through to much of the rest of Asia in October, data released Friday showed, lifting manufacturing activity and easing concerns about the region’s flagging growth.
Emerging Asia’s economic expansion, red hot in the years immediately after the financial crisis, has slowed in the past few years amid persistently weak demand from the West and a sharp deceleration in China and India, two of the region’s largest economies. Growth in the region slowed from 9.1 percent in 2010 to about 6 percent this year, according to estimates from the Asian Development Bank.
But recent numbers show a more optimistic picture. In South Korea, for example, trade data showed October exports climbed 7.3 percent, compared with those of a year earlier, far more than expected, reflecting better demand from the rest of the world.
“It’s looking reasonably solid,” said Klaus Baader, a regional economist at Société Générale in Hong Kong, adding that South Korea is the first country in the region each month to report on its trade performance and that its export data serves as a bellwether for global demand. “It reflects the pickup we’ve seen in China during the third quarter — but it also reflects what is going on in the rest of the world, including the better tone in Europe, which has at least left recession now.”
Surveys of purchasing managers in manufacturing also showed that sector had regained some momentum.
The indexes, compiled by the research firm Markit and published by HSBC, rose to their highest levels in several months in China, Taiwan, Indonesia and South Korea. In the case of Taiwan, the reading jumped a full point, to 53.0, its highest level since March 2012. And in China, a similar index published by the Chinese statistics bureau climbed to 51.4 in October, an 18-month high. The exception was India, where the index came in at 49.6, reflecting that country’s slowing growth. Readings above 50 represent expansion.
At the same time, the picture in Japan has improved significantly in the past few months, as a package of aggressive stimulus measures implemented by the government of Prime Minister Shinzo Abe has injected vigor into an economy that had been languishing for years.
“Japan has ceased to be a drag on the rest of Asia,” Mr. Baader said. “You have to remember, Japan is still the world’s third-largest economy, so if it is back in the ballgame, it makes a significant difference to the rest of the world — and especially for Asia.”
The improved global backdrop has created demand in disparate areas, including air transport, with the International Air Transport Association saying on Thursday that global demand for passenger traffic had risen 5.5 percent in September from a year earlier. Asia-Pacific carriers reported an increase of 8.5 percent.
Many corporate giants in the region have reported better earnings in recent days.
The South Korean carmaker Hyundai Motor, for example, reported a 4 percent profit improvement for the quarter that ended in September, and Samsung Electronics’ quarterly profits jumped 25 percent.
“It does look like the developed world environment is a bit more comfortable than it has been for the past couple of years,” said Richard Jerram, chief economist at Bank of Singapore. “This is helping to provide an offset to the fact that domestically driven growth has been flagging a little bit.”
Mr. Jerram cautioned that the slight pickup in the October purchasing managers indexes did not necessarily herald a sustained or sharp reacceleration in the region.
Growth in many of Asia’s developing economies is closely tied to that of China, whose expansion has slowed from more than 10 percent before the global financial crisis to about 7.5 percent this year as the authorities have sought to put the economy on a more sustainable and balanced footing. Few analysts think the Chinese economy will manage more than 8 percent growth next year, and some believe it could sag below 7 percent.
Faster growth in Japan could help increase demand from that country, but the weaker yen also means Japanese manufacturers have become more competitive, relative to their foreign rivals.
And the Federal Reserve will probably pare back its support of the U.S. economy next year — a move that is likely to cause inflows of Western cash into emerging Asian economies to drop off.
Rob Subbaraman, chief economist for Asia outside Japan at Nomura in Singapore, said that would be painful in Asia, which has become “addicted” to the easy money and foreign capital of the past few years.
Although he expected exports from Asia to improve next year as Japan and the United States picked up steam, an ailing Europe and slower growth in China meant that exports would remain “subdued,” he said.
“It would be rash to suddenly get bulled-up on Asia,” Mr. Subbaraman said. “Investors will become increasingly more discerning, differentiating between different countries’ economic fundamentals. It has become increasingly hard to generalize across the region.”