April 1 (Reuters) - Companies struggled in China and much of the rest of Asia in March amid persistently weak domestic and global demand, suggesting that policymakers may have to resort to more stimulus to spur growth.
Three separate surveys of China's factory and services sectors released on Wednesday showed stubborn weakness in the world's second-biggest economy, putting the government's newly minted growth target of around 7 percent for the year at risk.
The official Purchasing Managers' Index ticked up to 50.1 in March from 49.9 in February, but a separate private survey from HSBC which focuses on small and mid-sized firms showed factory activity contracted after two months of recovery.
With their indexes hovering around the 50 level that separates a contraction in activity from an expansion, both reports indicate economic conditions remain sluggish, which may well be reflected in China's first-quarter growth figures on April 15.
"Recent policy actions, such as mortgage rule easing, suggest that concerns at the top level of the government are rising. We believe this suggests that more easing measures, particularly monetary easing measures, will be rolled out," said Qu Hongbin, HSBC's chief China economist.
"The March economic activity data are due to be released in the next two weeks. Further confirmation that the real economy is now tracking below the official target will likely prompt easing measures from the PBoC."
Some are calling for even more stimulus in Japan, too, including one of the architects of premier Shinzo Abe's "Abenomics" reflationary policies.
The Bank of Japan must ease policy further at its rate review on April 30, Kozo Yamamoto told Reuters on Wednesday. "The economy is at a standstill and prices are seen falling ahead.
To do nothing isn't an option for the BOJ," said Yamamoto, an expert on monetary policy in Abe's ruling Liberal Democratic Party. Japanese manufacturing activity expanded more slowly in March than in the previous month as domestic orders contracted for the first time in almost a year, in a worrying sign that the recovering economy may be losing momentum.
Similar manufacturing surveys out of Europe and the United States are due later in the day. Preliminary readings signalled euro zone business activity grew at its fastest pace in nearly four years in March, suggesting the economy was finally gaining momentum, although the recovery may remain hesitant as long as the threat of a Greek departure from the euro hangs over the region.
Analysts predict a modest expansion in U.S. manufacturing activity, taking the view that a recent slowdown was probably a blip related to harsh winter weather and keeping alive expectations that the Federal Reserve will start to raise interest rates later this year.
SOBERING
Figures elsewhere in Asia provided a sobering read.A Bank of Japan survey showed big firms were looking to cut their spending plans as demand weakened. In South Korea, exports suffered their biggest fall in two years last month, while inflation hit its lowest since 1999. A slump in oil prices has brought inflation down around the region but, at a time of weak demand, some countries like China are increasingly worried about deflation taking root.
Factory activity in Indonesia - the biggest economy in the Association of Southeast Asian Nations (ASEAN) - contracted for the sixth straight month as output and new orders dropped at the fastest rate on record, a survey by HSBC/Markit showed.
Hopes that a strengthening U.S. economy and lower energy costs would spur activity in Asia have proved elusive so far. "For Asia-Pacific as a whole, we still see limited evidence that those tailwinds, namely the pick-up in U.S. consumer spending and sharply lower oil prices, are boosting growth," said Paul Gruenwald, Standard & Poor's Asia-Pacific chief economist.
"Only India seems to be bucking the trend." Standard Chartered economists said the fall in oil prices and its deflationary impact had been the biggest catalyst for the current wave of easing by Asian central banks. India has cut rates twice already so far this year and China has eased policy two times, with more moves expected. Singapore, Australia, South Korea, Thailand and Indonesia have also eased.
"Our Asia macro trackers show that growth is moderating, inflation is low and monetary conditions are still relatively tight. There is room for further easing, especially in China and the ASEAN region," they wrote in a report to clients.
yahoo.com
Three separate surveys of China's factory and services sectors released on Wednesday showed stubborn weakness in the world's second-biggest economy, putting the government's newly minted growth target of around 7 percent for the year at risk.
The official Purchasing Managers' Index ticked up to 50.1 in March from 49.9 in February, but a separate private survey from HSBC which focuses on small and mid-sized firms showed factory activity contracted after two months of recovery.
With their indexes hovering around the 50 level that separates a contraction in activity from an expansion, both reports indicate economic conditions remain sluggish, which may well be reflected in China's first-quarter growth figures on April 15.
"Recent policy actions, such as mortgage rule easing, suggest that concerns at the top level of the government are rising. We believe this suggests that more easing measures, particularly monetary easing measures, will be rolled out," said Qu Hongbin, HSBC's chief China economist.
"The March economic activity data are due to be released in the next two weeks. Further confirmation that the real economy is now tracking below the official target will likely prompt easing measures from the PBoC."
Some are calling for even more stimulus in Japan, too, including one of the architects of premier Shinzo Abe's "Abenomics" reflationary policies.
The Bank of Japan must ease policy further at its rate review on April 30, Kozo Yamamoto told Reuters on Wednesday. "The economy is at a standstill and prices are seen falling ahead.
To do nothing isn't an option for the BOJ," said Yamamoto, an expert on monetary policy in Abe's ruling Liberal Democratic Party. Japanese manufacturing activity expanded more slowly in March than in the previous month as domestic orders contracted for the first time in almost a year, in a worrying sign that the recovering economy may be losing momentum.
Similar manufacturing surveys out of Europe and the United States are due later in the day. Preliminary readings signalled euro zone business activity grew at its fastest pace in nearly four years in March, suggesting the economy was finally gaining momentum, although the recovery may remain hesitant as long as the threat of a Greek departure from the euro hangs over the region.
Analysts predict a modest expansion in U.S. manufacturing activity, taking the view that a recent slowdown was probably a blip related to harsh winter weather and keeping alive expectations that the Federal Reserve will start to raise interest rates later this year.
SOBERING
Figures elsewhere in Asia provided a sobering read.A Bank of Japan survey showed big firms were looking to cut their spending plans as demand weakened. In South Korea, exports suffered their biggest fall in two years last month, while inflation hit its lowest since 1999. A slump in oil prices has brought inflation down around the region but, at a time of weak demand, some countries like China are increasingly worried about deflation taking root.
Factory activity in Indonesia - the biggest economy in the Association of Southeast Asian Nations (ASEAN) - contracted for the sixth straight month as output and new orders dropped at the fastest rate on record, a survey by HSBC/Markit showed.
Hopes that a strengthening U.S. economy and lower energy costs would spur activity in Asia have proved elusive so far. "For Asia-Pacific as a whole, we still see limited evidence that those tailwinds, namely the pick-up in U.S. consumer spending and sharply lower oil prices, are boosting growth," said Paul Gruenwald, Standard & Poor's Asia-Pacific chief economist.
"Only India seems to be bucking the trend." Standard Chartered economists said the fall in oil prices and its deflationary impact had been the biggest catalyst for the current wave of easing by Asian central banks. India has cut rates twice already so far this year and China has eased policy two times, with more moves expected. Singapore, Australia, South Korea, Thailand and Indonesia have also eased.
"Our Asia macro trackers show that growth is moderating, inflation is low and monetary conditions are still relatively tight. There is room for further easing, especially in China and the ASEAN region," they wrote in a report to clients.
yahoo.com
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