Indonesian Manufacturing Increases Higher When Activities in Asia Slow

Manufacturing activity in several export-oriented Asian countries slumped in December, pressured by the US-China trade war and waning surges in the technology sector.

Reported by Bloomberg, the Purchasing Managers’ Index (PMI) of China from Caixin Media and IHS Markit fell to 49.7 from 50.2, the lowest level since May 2017.

This figure confirms the trend in the official PMI figures released Monday, which showed a decline to 49.4 in December, the weakest since early 2016. The numbers below 50 indicate contraction.

Asian stock markets fell, with the sharpest decline occurring in Hong Kong and China, while stock exchanges in Australia and South Korea also weakened.

The Hang Seng index fell 2.38%, while the Shanghai Composite index fell 1.02%. The Kospi index fell 0.62%.

Meanwhile, the Nikkei PMI and IHS Markit Taiwan fell to 47.7 in December from 48.4 in November, this figure also fell from the level of 56.6 in the same month the previous year.

This decline was partly due to a decline in demand for machinery and electronic goods, as well as information and communication equipment, amid slowing orders for new smartphones and turbulent trade wars.

Meanwhile, the Malaysian PMI fell to 46.8 from 48.2. The number of new orders is in the weakest position since May. The South Korean PMI remained in contraction territory for the second month in a row, with exports falling in December.

However, the Indonesian PMI actually recorded an increase to the highest position in the last four months in December to a level of 51.2 from 50.4 in the previous month.

The PMI data shows how the ongoing trade war between the US and China disrupts demand in various Asian manufacturing centers.

Although US President Donald Trump has signaled that negotiations with China made progress, economists remain worried that the negotiations could stall ahead of the March 1 deadline.

Xia Le, head of Asian economist at Banco Bilbao Vizcaya Argentaria SA said deteriorating data could push Trump and Xi to reach a trade agreement.

“In China, they face a slowdown and according to the latest data this slowdown is worse than expected,” he said, as quoted by Bloomberg.

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