02/08/2025

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BIZ & FINANCE SATURDAY | AUG 2, 2025

Asia factory activity slump deepens TOKYO: Asia’s factory activity deteriorated in July as soft global demand and lingering uncertainty over US tariffs weighed on business morale, private sector surveys showed yesterday, clouding the outlook for the region’s fragile recovery. o Manufacturing cools in China, Japan, South Korea; India’s outlook dims as Trump shakes global economy Most of the survey data was collected before the announcement of a Japan-US trade agreement last month, which lowers tariffs imposed on Japan to 15% from a previously threatened 25%.

labour market is gradually losing momentum.” Financial markets have pushed back an anticipated September rate cut to October. With tariffs starting to raise inflation, some economists believe the window for the Fed resuming policy easing this year is closing. But others still believe the Fed could still cut rates in September, especially if the Bureau of labour Statistics’ preliminary payrolls benchmark revision in September projects a sharp decline in the employment level from April 2024 through March this year. The Quarterly Census of Employment and Wages, derived from reports by employers to the state unemployment insurance programs, has indicated a much slower pace of job growth between April 2024 and December 2024 than payrolls have suggested. “If it’s an ugly downward revision, the Fed will move, there is no question,“ said Brian Bethune, an economics professor at Boston College. – Reuters domestic economy was compounded by the impacts of US tariff policy,” said Usamah Bhatti, economist at S&P Global Market Intelligence. The survey was conducted from July 10-23, before South Korea reached on Wednesday a trade deal with the US lowering tariffs to 15% from a threatened 25%. An outlier was India, which saw manufacturing activity expand at the fastest pace in 16 months in July on robust demand, its PMI showed. But business confidence fell to a three-year low amid competitive pressures and inflation concerns, with a lack of progress in striking a trade deal with the US adding to the gloom. Factory activity in July expanded in the Philippines and Vietnam, but shrank in Taiwan, Indonesia and Malaysia, PMIs showed. – Reuters

Federal government job losses as the Trump administration wields the axe on headcount and spending, excluding immigration enforcement, could mount after the Supreme Court gave the White House the green light for mass firings. But the administration has also said several agencies were not planning to proceed with layoffs. The reduction in immigration flows means the economy now needs to create roughly 100,000 jobs per month or less to keep up with growth in the working age population. The decline in the unemployment rate to 4.1% in June was in part due to people dropping out of the labour force. July’s anticipated rise would still leave the jobless rate in the narrow 4%-4.2% range that has prevailed since May 2024. “The July jobs report is unlikely to shake the Fed out of its ‘wait-and-see’ posture,“ said Gregory Daco, chief economist at EY-Parthenon. “But it will add further evidence that the As the trade deal with Washington kicks in, “it will be important to see if this will translate into greater client confidence and improved sales in the months ahead,” said Annabel Fiddes, economics associate director at S&P Global Market Intelligence, which compiles the survey. South Korea also saw factory activity contract in July for the sixth straight month with the S&P Global PMI falling to 48.0 in July, from 48.7 in June. “Both production volumes and new orders fell at a steeper rate than that in June, with anecdotal evidence indicating that weakness in the

acknowledged that this dynamic was “suggestive of downside risk.” Job growth has slowed amid uncertainty over where President Donald Trump’s tariff levels will eventually settle. Trump on Thursday slapped dozens of trading partners with steep tariffs ahead of yesterday’s trade deal deadline, including a 35% duty on many goods from Canada. The White House’s immigration crackdown has reduced labour supply as has an acceleration of baby boomer retirements. “We just don’t have a roadmap yet with respect to tariffs, and now that it’s coming into place, I think that can certainly help, but if you’re thinking about what you’re planning for your business over the next two to three years ... you don’t want to make that decision until you know what your costs of running your business are going to be,“ said Michael Reid, senior US economist at RBC Capital Markets. Nonfarm payrolls likely increased by 110,000 jobs last month after rising by 147,000 in June, a Reuters survey of economists showed. That business growth led manufacturers to scale back production, boding ill for the region’s economy. The S&P Global China General Manufacturing PMI fell to 49.5 in July from 50.4 in June, undershooting analysts’ expectations of 50.4 in a Reuters poll and dropping below the 50 threshold that separates growth from contraction. The reading comes a day after an official survey showed China’s manufacturing activity shrank for a fourth straight month in July, suggesting a surge in exports ahead of

reading would be below the three month average gain of 150,000. Estimates ranged from no jobs added to an increase of 176,000 positions. An economist predicting no change in payrolls pointed to the jump in state and local government education jobs in June, which accounted for nearly half of the employment gains that month. “When the academic year ends, there is a huge drop in payroll levels at schools,“ said Stephen Stanley, chief US economist at Santander US Capital Markets. “The fact that there were fewer reductions than usual in June suggests to me that more of the usual wave of reductions came in July.” Stanley also argued that there had been a torrent of anecdotal and survey evidence suggesting that businesses large and small slowed their hiring activity this summer in the face of elevated policy uncertainty. This led Stanley to anticipate private sector payrolls growth slowed further in July rather than accelerated as most economists expected after the economy added higher US tariffs has started to fade while domestic demand remained sluggish. The survey “provides further evidence that China’s economy lost some momentum last month, largely due to domestic weakness,” said Zichun Huang, an economist at Capital Economics. The S&P Global Japan manufacturing purchasing managers’ index (PMI) also fell to 48.9 in July from 50.1 in June, a sign US tariffs were hurting the world’s fourth largest economy.

The surveys were taken before Japan and South Korea clinched trade deals with Washington, offering some hope that receding uncertainty could prop up manufacturing activity in coming months, some analysts say. Factory activity shrank in export power-houses Japan and South Korea, surveys for July showed, underscoring the challenge Asia faces as President Donald Trump’s policies threaten the global free trade system the region relied upon for growth. China’s factory activity also deteriorated in July as softening unemployment rate forecast rising back to 4.2%, but that probably would be insufficient to spur the Federal Reserve (Fed) to resume cutting interest rates soon as tariffs are starting to fan inflation. The anticipated slowdown in nonfarm payrolls in the Labour Department’s closely watched employment report yesterday would mostly be payback after a surprise surge in state and local government education boosted employment gains in June. The US central bank on Wednesday left its benchmark interest rate in the 4.25-4.5% range. Fed Chair Jerome Powell’s comments after the decision undercut confidence the central bank would resume policy easing in September as had been widely anticipated by financial markets and some economists. Though Powell described the labour market as being in balance because of supply and demand both declining at the same time, he

Slower US job growth in July likely, unemployment seen at 4.2% WASHINGTON: US job growth likely slowed in July, with the the fewest jobs in eight months in June.

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