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Asia Trudges Against Headwinds from Europe

A trio of articles this week piece together a gloomy triptych of Asia, proving that the region is far from immune to the twists and turns of Europe’s ailing economy. Reuters reports major slowdowns in manufacturing not only in China and India but also South Korea, Australia, and Taiwan. Next, the NYT spotlights China, where deflation didn’t do much for exporters because of the euro mess:

Beijing has also allowed its currency, the renminbi, to weaken against the dollar in recent months, in what seems to be an effort to aid struggling exporters. However, that has not helped exports to Europe, as the renminbi has not weakened against the euro and demand on the Continent remains soft.

The FT also elaborated on the regional manufacturing slowdown, one anaylist warning of “much more pain to come on the export side”:

Japanese PMI fell two points to 47.9 in July, according to the Markit/JMMA. Activity in Australia’s manufacturing sector, which depends heavily on Chinese demand for its resources, hit a three-year low in July. The Australia Industry Group PMI index dropped 6.9 points to 40.3 last month.

The poor data out of Asia highlight the region’s dependence on demand from the US and Europe, whose economies have struggled since 2008.

While the eurozone sovereign debt crisis has hit growth in Europe for more than a year, the effects have only recently started to feed through into reduced demand for Asian exports.

If you factor in the local (and, for that matter, global) effects of China’s own slowing economy as well as the anemic growth in the other major importer, the U.S., then you begin to see how the Asian stagnation may be bound to drag on in coming months.

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  • Ed Snyder

    And those headwinds aren’t going to slacken anytime soon as long as “European Consumers Tighten Their Belts”:

    “Dour indicators are piling up. French consumers spent 0.2% less in the second quarter than the first, on fewer manufactured goods, the government statistics agency said late last month. In July, consumer confidence across the 17-nation currency bloc fell to its lowest level since 2009, the European Commission said. Consumer spending on goods and services in Western Europe is expected to slip 0.9% in inflation- and exchange-rate-adjusted terms in 2012, compared to a 1.9% increase forecast for the U.S., according to market-research firm Euromonitor International.

    “The tighter purse strings are squeezing multiple industries. At the roughly 180 European-listed companies on the Stoxx 600 index that had reported quarterly earnings by the end of last week, profit was down 12% compared with a year ago, according to new data compiled by Thomson Reuters. Things aren’t expected to improve soon: Analysts have revised their third-quarter estimates for those companies’ earnings down 6.2% in the last 30 days, Thomson Reuters said Friday.

    “Among the biggest shifts is in groceries. For years, European households have spent proportionately nearly double what Americans do on food to eat at home. But higher prices are pushing people in some countries to actually reduce the volume of groceries they buy, analysts say. Overall at-home food expenses per household in Western Europe are expected to drop 2.7% in 2012, according to Euromonitor, as consumers shift to “hard discounters” such as closely held Aldi that offer far fewer products, often their own brands, at cheaper prices.”

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