Key Points
- Most Asian factory activity contracted in June, largely due to uncertainty over U.S. tariffs, which hurt customer demand.
- There were small positive signs in some countries, with Japan showing slight growth and South Korea’s decline slowing down.
- India was the region’s standout performer, with its manufacturing sector growing at the fastest pace in 14 months.
- Stalled trade negotiations with the U.S. remain a primary concern for Asia’s export-reliant economies.
Factories across many Asian economies slowed down in June as ongoing uncertainty over U.S. tariffs dampened demand. The trend highlights the challenge policymakers face in guiding their economies through a period of shaky global trade. These latest figures raise the stakes for tense trade negotiations with Washington.
However, the picture wasn’t entirely gloomy. Japan’s manufacturing sector saw growth for the first time in 13 months, while South Korea’s factory activity contracted at a slower pace. China presented a mixed message, as a private survey showed unexpected growth driven by new orders, directly contradicting an official government report that indicated a third straight month of decline.
Despite these few bright spots, analysts warn that the gains are fragile. Stalled trade talks with the United States, along with the prospect of weakening global demand, continue to cast a shadow over the region. “The external environment remains severe and complex, with increasing uncertainties,” said Wang Zhe, an economist at Caixin Insight Group.
India stood out as a major bright spot. Its manufacturing activity accelerated to a 14-month high, powered by a surge in international sales that led to record hiring. In contrast, many other countries struggled. Factory activity contracted in Indonesia, Vietnam, and Taiwan, while Malaysia experienced only a slight improvement.
Looking ahead, economists expect that regional leaders will shift their focus from inflation to growth. With manufacturing showing broad weakness, most experts believe central banks in Asia will continue to cut interest rates to help stimulate their economies and navigate the uncertain road ahead.
