Slump in export orders hits Asian factories

Mon Jul 2, 2012 2:12am EDT
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By Koh Gui Qing

BEIJING (Reuters) - A factory slump in Asia's two biggest exporters China and Japan deepened in June as crumbling orders from abroad dragged activity to seven-month lows, heightening worries that the health of the global economy is deteriorating.

PMI reports on major exporters South Korea and Taiwan also indicated new orders from overseas were falling. The manufacturing sectors in these countries contracted in June for the first time in five months, the reports showed.

In India, where the economy is more reliant on domestic activity, the factory sector picked up in June. But its new export orders growth was the weakest in seven months.

The data increases the risk that the economies of major demand centers Europe and the United States may be weaker than previously thought. Purchasing managers' reports on the two regions are due to be published later on Monday.

The latest sign that China's economy is struggling came on Monday with a private purchasing managers' index (PMI) showing factory activity shrank at its fastest pace in seven months in June. The index slipped to 48.2 from May's 48.4.

The drop was driven by new export orders skidding to depths last seen in March 2009 as demand at home and abroad wilted. The slump dragged prices of finished products from Chinese factories to 42-month lows.

The gloomy outcome mirrored a Chinese government PMI issued on Sunday that also fell to seven-month lows of 50.2 in June from May's 50.4. Though the data was stronger than expected, it still showed growth in the factory sector was close to stalling.

The run of weak data suggested no immediate pick-up for the world's second-biggest economy, a story that is similar in Japan, home to big-brand exporters, such as camera and printer maker Canon Inc (7751.T: Quote), which earns about 80 percent of its revenues abroad.   Continued...

An employee works at the Yiwu Lianfa clothing factory in Yiwu, Zhejiang province, June 8, 2011. REUTERS/Carlos Barria