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Monday, September 03, 2012 12:01 PM

Asia Export Machine Cracks Wide Open: South Korea Production Falls at Fastest Rate in Eight Months; Taiwan Exports Deteriorate Sharply; Global Recession Call Revisited

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It's not just Chinese manufacturers that are struggling. It is also Japan, South Korea, and Taiwan. In other words, the Asian export machine has cracked wide open.

South Korea

The Markit South Korea Manufacturing PMI® shows Production Falls at Fastest Rate in Eight Months.

Key points

  • New orders contract at sharp rate
  • New export orders decrease for third month running
  • Falling output prices signalled


Output contracted at the fastest pace in eight months amid reports of a strike in the auto sector. Moreover, respondents stated that the global recession had adversely affected production. Total new business fell and, although sharp, the rate of contraction was slower than in July. New export business also decreased, though at a slight rate. Panellists stated that weaker domestic demand and a downturn in the global economy had both fed through to the latest contraction in order book volumes

Purchasing activity at manufacturing firms in South Korea decreased for the third successive month in August. The rate of contraction was solid, but eased from that recorded in July.

The Markit Taiwan Manufacturing PMI™ shows Output contracts at steepest pace in the year-to-date.
Key points

  • New orders and new export orders fall for third month running
  • Workforces contract slightly
  • Input and output prices fall in line with weaker demand


Weaker national and international demand led to a third successive fall in output at manufacturing firms in Taiwan. The pace of the latest contraction was steep and the fastest since December 2011. New orders and new export business both declined, extending the current sequence of contraction to three months. According to panellists, the slowdown in the wider economy resulted in weaker demand for manufactured goods.

In line with falling production, backlogs of work decreased for the third month running. Furthermore, the pace of contraction was the sharpest in 2012 so far.

Input prices at Taiwanese manufacturing firms fell for the fourth consecutive month in August. Although marked, the pace of decrease was slower than that recorded in July. Panellists reported that input costs fell in line with decreasing metal and raw material prices. Moreover, it was mentioned that weaker demand also contributed to the latest decline. In line with input costs, charges fell at a solid rate as manufacturers attempted to maintain competitiveness and attract new business, it was reported.

Earlier today I noted China New Export Orders Drop Most Since March 2009, Operating Conditions Down 10th Consecutive Month


On August 31, I noted Japan Manufacturing PMI Hits 16 Month Low, New Orders Plunge

Global Recession

In the South Korea report it was interesting to see the line "respondents stated that the global recession had adversely affected production".

I certainly believe the global economy is in recession and stated so on July 11 in Case for US and Global Recession Right Here, Right Now.

Recession Definitions

Contrary to popular myth, recession does not mean two consecutive quarters of economic contraction. Rather, two consecutive quarters of economic contraction is a sufficient, but not necessary condition.

In the US, the NBER is the official designator of recession start and end points. Many recessions have started with GDP still growing.

The "Conditions for Global Recession" are even looser. "The International Monetary Fund (IMF) considers a global recession as a period where gross domestic product (GDP) growth is at 3% or less. In addition to that, the IMF looks at declines in real per-capita world GDP along with several global macroeconomic factors before confirming a global recession."

Global GDP will struggle to rise 1% and it may even contract. Even 2% is in recession territory, and that is a given.

Mike "Mish" Shedlock
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