| NEW DELHI, June 1
NEW DELHI, June 1 Factories across much of Asia
ran into a soft patch in May as export demand slowed, but
analysts said the weakness was likely to be temporary amid signs
of steady improvement in the global economy.
The findings from private business surveys came a day after
Moody's Investors Service painted an upbeat picture of global
The readings add to signs that Asian economies generally
remained buoyant in the second quarter, with manufacturing
activity continuing to improve -- albeit at a more modest pace
-- and business confidence remaining strong overall.
Still, there were mixed readings on regional powerhouse
China, with official data showing steady growth fuelled by an
ongoing construction boom but a private survey pointing to the
first contraction in activity in 11 months.
After battling a multi-year trade recession, Asian exports
have seen a strong rebound this year, often led by electronics.
The tailwinds from Chinese commodities and tech products demand,
however, appear to fading.
Yet, Tim Condon, ING's chief Asia economist, says the growth
outlook for the region remains positive as strengthening
economies in the United States, Japan and Germany would support
shipments from the region.
"May figures are just a blip," he said. "The hopes for
cyclical recovery remains a positive theme, thanks to the
strength of G3 economies."
Data from Japan backed that assessment as manufacturing
activity grew at its fastest pace in three months in May.
The world's third-largest economy grew at its fastest pace
in a year in the first quarter, marking the longest period of
expansion in a decade.
An increase in capital expenditure in the first quarter also
adds to a raft of recent data pointing to economic expansion.
The cheerful figures led to a 1 percent gain in Japan's
Nikkei on Thursday.
MSCI's broadest index of Asia-Pacific shares outside Japan
, however, was flat after four sessions of losses
as investors took profits after stocks hit a two-year high last
China's main indexes fell after the more downbeat private
PMI report. The blue-chip CSI300 index fell 0.1
percent, while the Shanghai Composite Index lost 0.5
Similar business surveys to be released in Europe and North
America later in the day are expected to show solid growth.
EUROPE ON A ROLL
Like Japan, Germany's economy is also on an upswing.
Europe's biggest economy defied increased political risks to
post the strongest quarterly growth rate in a year in the last
Overall, European growth has outpaced that of the United
States, but the U.S. is rebounding after a soft start to the
With economic growth in the world's largest economy seen
between 2.0-3.7 percent in the second quarter, up from 1.2
percent a quarter ago, the Federal Reserve is expected to raise
interest rates later this month.
On Wednesday, Moody's said G20 economies, which account for
78 percent of the global economy, is expected to grow 3.1
percent on year in 2017 and 2018, faster than 2.6 percent growth
The agency also said the biggest risks to global growth,
including protectionism and European Union exits, seemed to have
China, however, is widely expected to slow over the year due
to reduced property-related investment as liquidity tightening
measures of the central bank, including limits on home mortgage
lending, take effect.
The Caixin/Markit Manufacturing Purchasing Managers' index
(PMI), which tends to focus on China's smaller firms, fell below
the 50-point demarcating growth and contraction to 49.6 in May.
That was less than economists' forecast of 50.1 and extended
a streak of declines to three months since 51.7 in February.
"China's manufacturing sector has come under greater
pressure in May and the economy is clearly on a downward
trajectory," Zhengsheng Zhong, director of macroeconomic
analysis at CEBM Group.
The findings sharply contrasted with official readings a day
earlier which showed steady manufacturing growth as government
infrastructure spending boosts demand for construction materials
from cement to steel.
The divergence may suggest that much of China's recent
economic strength remains strongly dependent on heavy industry
and continued government stimulus, with other sectors facing
more challenging conditions.
The Caixin survey focuses more on smaller firms, which may
be benefitting less from the building boom and are more strained
by rising financing costs.
Readings from Asia's No. 4 economy South Korea also had
investors scratching their heads.
The business survey showed factory activity shrank for a
10th straight month in May as output, new orders and employment
fell further on persistently weak demand, particularly from the
country's major global markets.
However, official data on Thursday showed the country's
exports clocked double-digit growth in May from a year
(Reporting by Rajesh Kumar Singh; Editing by Kim Coghill)