Asia’s factories hold onto growth as Trump’s tariff threat looms
FACTORY activity across Asia expanded in December as domestic orders and output improved, but weaker confidence and a sustained drop in export orders point to global risks ahead.
The purchasing managers index (PMI) gauge for South-east Asia eased slightly to 50.7 from 50.8 in November, capping the year’s growth at 51 for 2024, according to S&P Global’s PMI. Growth was led by several countries across the region including Taiwan, whose PMI registered the highest reading since July and well above the critical 50 threshold that separates expansion and contraction.
Meanwhile, separate data from Caixin showed China’s manufacturing activity expanding in December at a slower pace as factories await the results of recent stimulus. And in export powerhouses South Korea and Vietnam, activity dipped into contraction territory in December.
The latest data come ahead of the inauguration later this month of US president-elect Donald Trump, who has vowed hefty tariffs on China as well as universal levies on imports – including some on his first day in office. The manufacturing data underscore mounting concerns about trade protectionism abroad and domestic demand going forward.
“While the 2025 output outlook remains positive, it waned slightly,” Maryam Baluch, economist at S&P Global Market Intelligence, said. “Growth in new orders remains mild and heavily dependent on domestic demand, while weak international demand continues to hinder growth.”
Taiwan’s purchasing managers index climbed to 52.7 last month, its highest reading since July, according to S&P Global.
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Overall data in Asia show that demand remained broadly domestic, with new orders expanding for a 10th straight month and backlogs also piling up. Purchases rose to the highest pace since August, and were quickly put to use as inputs, the data show.
But export orders have fallen for more than two years, indicating that demand from abroad continues to slow. The degree of confidence among those surveyed also fell to an eight-month low and remains below its long-run average.
In South Korea, often seen as a barometer for global demand given the diversity of its exports, activity contracted on rising costs and falling production and new orders. Notably, manufacturers were pessimistic on future activity for the first time since 2020.
The country is going through a period of political instability, as President Yoon Suk-yeol was impeached after declaring martial law and the acting leader is rejecting calls to resign. South Korea’s worst airline disaster that killed 179 people last month is also weighing on the nation. BLOOMBERG
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