By Mayumi Otsuma and Jason Clenfield
April 1 (Bloomberg) -- Asia’s economic slump deepened in March as Japanese business confidence plunged to a record low, Chinese manufacturing shrank and South Korean exports fell for a fifth month.
The Bank of Japan’s Tankan index of sentiment among large manufacturers slid more than forecast to minus 58, the lowest since the survey began in 1974. The CLSA China Purchasing Managers’ Index stayed below 50, the threshold for a contraction, for an eighth month.
“Japan’s probably front-running things that are in store for Asia as a whole,” said Jan Lambregts, head of Asian research at Rabobank International in Hong Kong. “Asian economies continue to be export-dependent as a whole and that’s a situation that can’t be changed overnight.”
Asian economies excluding Japan will expand at the slowest pace in 11 years in 2009 as the global recession weakens trade and stimulus plans take time to revive growth, the Asian Development Bank said yesterday.
“We can’t rule out the possibility that we’ll have to cut our projections further,” Masahiro Kawai, dean of the ADB Institute in Tokyo, said in an interview today. Recoveries in the U.S. and Europe “are crucial for Asia, as is a pickup in domestic demand within the region,” he said.
South Korean exports declined 21.2 percent from a year earlier, faster than February’s revised 18.3 percent slide, the government said today. Hyundai Heavy Industries Co., the world’s largest shipbuilder, said last week orders in the first two months of this year fell 85 percent.
Regional Stimulus
Central banks across Asia have lowered interest rates to stimulate demand, and governments are pumping more than $700 billion in spending, tax cuts and cash handouts into their economies to kick-start local consumer and business spending.
South Korean President Lee Myung Bak unveiled a 17.7 trillion won ($13.4 billion) spending package last week to revive a nation on the brink of its first recession since the Asian financial crisis more than a decade ago.
Japanese Prime Minister Taro Aso, facing an election this year, is under pressure to prepare a stimulus plan that will alleviate the pain for households and businesses. Company executives said they have too many workers, the Tankan survey showed, signaling unemployment already at a three-year high is likely to rise further. Exporters from Nissan Motor Corp. to Panasonic Corp. have already slashed thousands of jobs.
“We will see more job cuts,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “The huge excesses of labor, equipment and inventories indicate Japan’s recession will continue for a while.”
Dwarfed by China
Aso, speaking to reporters yesterday before going to the Group of 20 summit in London, said he will compile his third stimulus package by mid-April, without giving details of its size. His 10 trillion yen ($102 billion) in extra spending since taking office in September is dwarfed by China’s 4 trillion yuan ($585 billion) package.
Chinese President Hu Jintao said the nation’s stimulus has “begun to take effect,” giving the government confidence that the economy can maintain steady and rapid growth.
Still, the drop in the purchasing index showed the danger of companies increasing orders for products in anticipation of, rather than in response to, government projects, said Eric Fishwick, head of economic research at CLSA in Hong Kong.
“Although China’s proactive monetary and fiscal policies are yielding positive results, the country’s economic recovery is still in first gear,” Jing Ulrich, chairwoman of China equities at JPMorgan, wrote in a report today.
Factory Closures
Asia excluding Japan will grow 3.4 percent this year, less than half of a September estimate of 7.2 percent, the ADB said yesterday. The lender expects Thailand, Malaysia and Singapore to contract. South Korea, Taiwan and Hong Kong will also shrink.
“Across the region, factory closures and job losses are rising, weighing on consumer sentiment and forcing households to cut back on spending,” the ADB said.
Taiwan’s Hon Hai Precision Industry Co., the world’s largest contract maker of electronics, cut 116,000 people from its workforce during the fourth quarter of 2008 as profit fell, according to company filings released yesterday.
Other statistics today also pointed to a deeper slowdown across Asia and the Pacific.
Thailand’s consumer prices declined for a third month in March as the deepening global recession weakened demand. In Australia, retail sales fell in February for the first time in five months and manufacturing shrank for a 10th month in March.
New Zealand’s business confidence was the second-worst on record in March as companies remained pessimistic about consumer spending, profits and hiring, an ANZ National Bank Ltd. survey showed yesterday.
To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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