In June, factory activity across several Asian economies continued to struggle under the shadow of uncertainty surrounding U.S. tariffs. Despite some glimmers of relief for manufacturers, prospects for economic recovery in the region remain dim. Recent private surveys indicate that policymakers are grappling with the repercussions of U.S. President Donald Trump’s aggressive trade policies. Japan showcased modest growth by expanding its manufacturing sector for the first time in over a year.
On the other hand, South Korea experienced a slight contraction, albeit at a reduced pace. Meanwhile, China’s Caixin purchasing managers’ index (PMI) notably grew in June, attributed to an uptick in new orders, challenging the findings of an official survey that indicated ongoing contractions. Analysts express concern over the stalled trade talks with the U.S., a decline in global demand, and sluggish growth in China, predicting these factors will continue to impact Asia’s manufacturing scene. Wang Zhe, an economist from Caixin Insight Group, noted a recovery in supply and demand but emphasized the prevailing uncertainties in the external environment.
He pointed out that the issue of domestic demand remains unresolved. The Caixin/S&P Global manufacturing PMI rose to 50.4 in June, indicating slight growth, while Japan’s final au Jibun Bank PMI increased to 50.1, signaling a minor upswing in output. In South Korea, the PMI stood at 48.7, marking the fifth consecutive month of contraction but reflecting some relief following a presidential election. The volatility of U.S. tariff policies, coupled with economic uncertainties, has prompted urgent calls from South Korean officials for a trade agreement with the U.S.
Despite the rebound in October exports, shipments to major partners such as the U.S. and China remain fragile. Contrastingly, India experienced a surge in manufacturing activity, hitting a 14-month high in June. However, other countries in the region, including Indonesia and Vietnam, reported declining manufacturing PMIs. Consequently, market analysts predict that regional policymakers may prioritize growth revitalization over inflation concerns.
This shift may drive central banks to adopt more accommodative monetary policies than previously expected.