Japanese, Korea Factory Cut Output: Signs of Asia-Wide Slowdown

From Reuters:

Factories in Japan and South Korea cut output in October, adding to evidence of an Asia-wide slowdown and boding ill for the rest of the world that has relied on the region to keep the global economy humming.

Japanese companies cut production for the fifth month and by the biggest margin since February 2009, while South Korea's industrial output fell for the third month in a row, disappointing markets which had bet on a rebound.

The fall in Japan's output was expected -- in fact a drop of 1.8 percent was smaller than the forecast 3.3 percent decline -- after a key stimulus measure, incentives for buyers of fuel-efficient cars, expired in September, and exports continued to cool.

The drop, however, cemented expectations that the world's third-largest economy after the United States and China would contract in the final quarter of the year after a stimulus-driven spurt in the third quarter.

South Korea, among the first economies to regain cruising speed after the global recession, is also losing steam, though Seoul still bets on solid export growth next year.

"The inventory rebuilding cycle after the recession has come to an end, and what we're left with is final domestic demand, which isn't doing that well across the globe," said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong.

Economists had long expected Asia and the world economy would slow in the second half of this year and early in 2011 as the rebuilding of inventories that had been depleted during the recession was drawing to an end and the effects of stimulus packages were wearing off.

But the cool-down came sooner and turned out to be more pronounced than many economists had anticipated. The economies of the Philippines, Thailand and Singapore all contracted in the past quarter, while growth in South Korea, Taiwan and Indonesia slowed markedly.

That leaves China, which slowed only marginally to a 9.6 percent annual clip in the third quarter, and India, as the mainstays of growth in the region.
http://www.reuters.com/article/idUSTRE6AT0OV20101130