Asia manufacturing activity weak in October

BEIJING—Manufacturing activity across Asia remained weak in October, surveys showed Tuesday, as US and European economic woes hit demand for the clothes, shoes and electronic gadgets made in the region.

Surveys of purchasing managers in Chinese factories showed activity almost stalled last month, while Taiwan, South Korea and Australia saw manufacturing contract as Europe and the United States tottered on the edge of recession.

China’s official purchasing managers’ index (PMI) – based on a survey of 820 manufacturers – dropped to 50.4 in October from 51.2 in September, the China Federation of Logistics and Purchasing said in a statement.

HSBC said its survey of more than 430 purchasing managers in China showed activity expanded slightly, with its index hitting 51.0 in October compared with 49.9 in September and the first time it has gone above 50 since June.

A reading above 50 indicates the sector is expanding, while a reading below 50 suggests a contraction.

But analysts said the government’s broader PMI survey was a more accurate reflection of the country’s manufacturing sector, which they expect to deteriorate in the coming months as the eurozone debt crisis continues.

“The policy environment is relaxed a little bit but it will not be reflected by the October data so quickly,” said Ren Xianfang, a Beijing-based analyst with IHS Global Insight.

HSBC said manufacturing activity in Taiwan shrank further in October to 43.7 from 44.5 in September, while South Korea saw a slight improvement with its reading increasing to 48 in October from 47.5 in the previous month.

Factory activity in Australia continued to contract despite the HSBC index rising to 47.4 from 42.3.

India bucked the trend, rising to 52.0 from 50.4 – its sharpest increase in three months as growth in new orders for business improved, but the index is still below the long-term PMI index average of 56, HSBC said.

Chinese manufacturers, who employ millions of workers and are a key driver of the world’s second largest economy, have faced additional pressure from Beijing tightening monetary policy in a drive to tame inflation.

As well as hiking interest rates five times since October last year, leaders have also ramped up the amount of money banks must hold in reserve, effectively restricting the what they can lend, in turn weighing on economic growth.

BNP Paribas chief China economist Ken Peng said the slowdown in Chinese manufacturing “has not ended” but there was no need for sharp reversal in government policy at this stage.

China’s official index measuring new export orders fell to 48.6 in October from 50.9 in September while the input price index, a gauge of raw material costs, plunged to 46.2 from 56.6, the federation said.

“The fall in the October PMI indicates that economic growth is likely to slow further in the future,” Zhang Liqun, a government analyst, said in the statement.

China’s economic growth eased to 9.1 percent in the third quarter from 9.5 percent in the second quarter as government efforts to tame inflation, as well as turbulence in Europe and the United States, curbed activity.

Premier Wen Jiabao indicated last week that the government might relax tight credit restrictions as small exporters struggle to pay their bills and falling property sales threaten to drive debt-laden developers to the wall.