Data released on February 1, 2012 has revealed economic trends indicating the impact of the European slowdown on the Asian economy. It has been revealed that as a result of the eroding demand from Europe has significantly hampered the export-driven economies of various Asian countries. This has in turn led to more pressure on policymakers to pace domestic growth to make up for the gap in demand. 

The Dragon Feels the Heat

In China, which is a regional manufacturing and export hub, the factory activity showed flickers of improvement according to the government’s purchasing managers’ index, but new export orders have seen a dramatic decline from December and a statement released by the Finance Ministry stated that  exporters faced “increasing difficulties”.

Global Economic TrendsAccording to official figures, China’s PMI inched up to 50.5 in the month of January from the previously recorded 50.3, just managing to not go under the 50 level that separates expansion from contraction. All indicators seem to be pointing towards the fact the world’s second-largest economy, and a significant driving factor in South Asian economy at large, is feeling the heat from Europe’s debt crises.

Other countries in the region continue to face problems of a similar nature, as export orders are plummeting almost in the manner of a free fall. Even as European countries witness the problems widening into a recession, their troubles look all set to engulf Asian countries halfway around the world as for them, European trade is a mainstay.

Economic Trends in Rest of Asia

In South Korea for instance, the exports  since  January 2011 showed an alarming drop of approximately 6.6 per cent, all the more worrying given that pundits at the time had predicted a 0.7 per cent rise. The country’s exports to Europe in the first 20 days of January 2012 showed a marked depression from the exports of the same period last year.

Data due later on Wednesday is expected to show the euro zone’s factory activity contracted in January for a sixth straight month.

South Korea’s manufacturing sector activity and new export orders both continued to dwindle for a sixth straight month in January, the longest losing run in three years.

In Taiwan, faltering exports bit into factory activity which receded for the eighth straight month. The index rose to 48.9 in January from 47.1 in December.

Economic Trends: India Fares Better Among Regional Peers

The fact that India has managed to buck the sordid economic trends prevailing has presented a perfect example to regional counterparts as to how manufacturing that’s driven by domestic demand can withstand pressure from external factors.

Factory activity in India has grown at the fastest pace in eight months. Unlike most of its Asian peers, India’s economy is primarily driven by domestic factors and it is far less exposed to flagging export demand.

The PMI reading of 57.5 in January marked almost three years of expansion in the manufacturing sector and gave reason for cheer to an economy hurt by stricter monetary policies and the government’s policy paralysis.

 

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