Global growth hopes hit as Asian manufacturing slows down

Hopes for a pick up in world growth this year have been hit by new data which shows factory activity stumbled across much of Asia in September, with slowdowns in India, Japan, and Taiwan and an outright decline in South Korea.

The lacklustre performance helped lift the US dollar above 110.00 yen for the first time since mid-2008 while punishing commodity prices globally, a positive for consumers but also a force for disinflation.

Subsiding price pressures was a feature of many of the manufacturing surveys today. Even Taiwan, one of the stronger economies in the region, reported output prices were cut for the eighth month in a row, while input inflation was the lowest in over a year.

"This should give the authorities plenty of room to keep policy accommodative to support growth," said HSBC economist John Zhu.

China this week cut mortgage rates and down payment levels for some home buyers for the first time since the global financial crisis, escalating efforts to boost an economy threatened by the sagging housing market.

Beijing has for some time now found it can no longer rely on exports and manufacturing as an engine for growth.

The official Purchasing Managers' Index of activity stayed stuck at 51.1 in September, only modestly above the 50 level that separates growth from contraction.

"The economy still faces a degree of downward pressure," said Chen Zhongtao, an official at the China Federation of Logistics and Purchasing which helps to publish the PMI.

International investors have also been unsettled by reading pro-democracy protests in Hong Kong, watchful for any signs of fallout for China's economy.

Reuters