Asia Seen Nearing End of Slowdown on China Recovery: Economy

Asia Seen Nearing End of Slowdown on China Recovery
Pedestrians walk through the shopping district of Mong Kok in Hong Kong, China. Photographer: Lam Yik Fei/Bloomberg

East Asian countries are poised to report gross domestic product data that may mark the bottom of the region’s slowdown, as signs of a recovery in China and the U.S. herald a revival in demand for exports.

Hong Kong’s GDP probably rose last quarter after declining the previous three months, according to a Bloomberg survey before a report tomorrow. Expansion in Malaysia and Thailand may have eased while Singapore’s contraction was probably worse than initially estimated, separate surveys showed. Regional growth will probably recover this quarter, Moody’s Analytics, Citigroup Inc., and Australia & New Zealand Banking Group predict.

“Across Asia, the business cycle likely reached its trough, with many economies reporting the worst growth in the third quarter,” said Glenn Levine, an economist at Moody’s Analytics in Sydney. “Stimulus measures are starting to boost Chinese demand and the recovery slowly coming into fruition in the U.S. means 2013 will be a better year for most of the region.”

Most Asian currencies, led by the South Korean won and Taiwanese dollar, have risen in the past three months as stronger housing demand in the U.S. and accelerating factory output in China signal the two largest economies may lift the world from its mid-year slowdown. While interest-rate cuts in Thailand and the Philippines in October underscored the immediate risks to growth, pressure to loosen monetary policy further has abated elsewhere, with Singapore and Indonesia refraining from stimulus in their most recent decisions.

“The region is unlikely to go for further easing at this point in time,” said Aninda Mitra, a Singapore-based economist at ANZ. “Countries are starting to face asset price and inflation pressures and they’ll have to be careful about that.”

Rising Confidence

China’s factory output and retail sales exceeded forecasts in October and exports climbed the most since May. U.S. consumer spending, the biggest part of the economy, and an improving housing market are leading the expansion amid rising confidence, better employment prospects and healthier household finances.

Hong Kong’s gross domestic product probably expanded 0.5 percent in the three months through September from the previous quarter, according to the median of 11 economists in a survey. Malaysia’s year-on-year economic growth eased to 4.8 percent in the third quarter from 5.4 percent, according to the median of 22 economists surveyed before a report due tomorrow.

Malaysian Prime Minister Najib Razak is increasing spending ahead of a general election that must be held by early 2013. Najib announced lower income taxes and more handouts for the poor in his 2013 budget unveiled in September, as the government projected Southeast Asia’s third-largest economy will expand as much as 5 percent in 2012.

Tentative Signs

In Thailand, Prime Minister Yingluck Shinawatra has also boosted spending and raised salaries as the nation recovers from the worst floods in almost 70 years. Gross domestic product probably rose 3 percent last quarter from a year earlier, slowing from a 4.2 percent gain in the previous three months, according to a Bloomberg survey before a report due Nov 19.

Meanwhile, Singapore’s economy probably shrank 2.9 percent in the third quarter from the previous three months, compared with a preliminary estimate of a 1.5 percent contraction, another survey showed. The government is due to release revised data tomorrow.

“We may be seeing some tentative signs of bottoming,” said Johanna Chua, the Hong Kong-based head of Asian economic research at Citigroup Inc. “However, this bottoming is not indicative of a sharp rebound ahead. U.S. growth momentum in the coming months will likely continue to be weighed by fiscal cliff uncertainties, European data is surprising on the downside, and while China’s domestic demand is showing a rebound, in the absence of fresh stimulus, the rebound will remain mild.”

Retail Sales

Singapore’s retail sales rose for a second month in September from a year earlier, a report showed today. New Zealand’s manufacturing industry expanded in October after three months of contraction, according to a purchasing managers’ index.

Gross domestic product in the euro area probably shrank 0.1 percent in the three months through September from the previous quarter, according to economists surveyed by Bloomberg News before advance estimates due today. Germany, France, Italy and Spain will also release growth numbers.

In the U.S., consumer prices probably rose 0.1 percent in October from the previous month, according to economists surveyed by Bloomberg News. Manufacturing in the New York region probably contracted for a fourth month in November, while initial jobless claims likely rose to 375,000 in the week ended Nov. 10, surveys showed.

Bounce Back

Worldwide, officials are becoming more confident about expansion prospects for next year. South Korea’s economy is expected to “bounce back” with stronger growth in 2013 as uncertainties over the global economy will likely ease, Bank of Korea Governor Kim Choong Soo, who held interest rates this month after two cuts earlier this year, said yesterday.

Growth in most economies in Asia will probably rebound in 2013, Asian Development Bank President Haruhiko Kuroda said in Hong Kong today. Expansions in Thailand, Hong Kong and Singapore will probably accelerate this quarter, according to economists surveyed by Bloomberg News from August to October.

International Monetary Fund Managing Director Christine Lagarde said yesterday in Kuala Lumpur growth in Asia will pick up after slowing down this year, provided European and U.S. policy makers implement the right measures.

Still, China’s new leaders headed by Communist Party General Secretary Xi Jinping will need to address an economy that Pacific Investment Management Co. forecast will grow the least in 23 years in 2013. Meanwhile, President Barack Obama is seeking ways to avoid $607 billion in automatic tax increases and spending cuts that threaten the world’s largest economy.

“All eyes are on China and the U.S.,” said Frederic Neumann, co-head of Asian economic research at HSBC in Hong Kong. “Growth numbers are coming in weaker, as the strength of domestic demand in the region is not enough to offset the drag on exports. We need more stimulus to come through from China and we need the U.S. to avoid a fiscal cliff.”

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