Factory activity in Asia's export powerhouses slowed to near three-year lows in October as European demand dropped, reinforcing fears the eurozone's debt troubles were sapping global growth.
The purchasing managers' indexes, released on Tuesday, also showed inflation pressures abating, which could bring the region's policymakers one step closer to easing should the economic outlook deteriorate.
China's official PMI registered its lowest reading since February 2009, an unexpected decline that reflected a drop in new export orders. The overall index dipped to 50.4 from September's 51.2, edging closer to the 50 line that separates growth from contraction.
Figures due later on Tuesday are expected to show the eurozone's manufacturing sector contracted for a third straight month, while US factory activity picked up modestly, according to Reuters polling.
A Reuters survey released on October 25 showed economists evenly split on whether the eurozone would slide back into recession. Two out of three predicted the European Central Bank would cut interest rates by December and a smaller fraction predicted the move would come at Thursday's policy-setting meeting.
The data from Asia did not bode well for Europe, where leaders have struggled to convince investors that a deal reached last week to write down the value of Greece's debt and boost a rescue fund would resolve the region's debt woes.
South Korea's PMI remained below 50 for a third consecutive month, its longest losing streak since the 2008-2009 global financial crisis. Its export figures, also released on Tuesday, showed shipments to the European Union dropped 20% from a year earlier for the October 1-20 period. Exports to the United States dropped a relatively modest 7%.
"Korea's exports had been resilient all year despite weakness elsewhere, notably in Taiwan," said ING economist Tim Condon. "Today's data is the first sign of a crack."
Taiwan's PMI dropped to 43.7 in October, a 33-month low. One in three respondents said new export orders fell, particularly from Europe and China.
India bucked the regional trend, reporting a slight pickup in its PMI. India's economy is far less reliant on exports for growth, which helps to insulate it from the global slowdown. Overall new orders rose, breaking a six-month streak of declines, although export orders dipped.
Inflation relief
The PMI data showed input prices easing across the region, a welcome respite for policymakers who have been reluctant to ease credit conditions while inflation remains above target.
In China, the input price sub-index tumbled to 46.2 in October from 56.6 a month earlier, dipping below 50 for the first time since April 2009.
This provides further evidence that Beijing's year-long tightening cycle is over. Still, economists see little chance of a rate cut before 2012. Instead, China will probably stick with targeted measures to ease lending conditions to small- and medium-sized businesses, where borrowing has been constrained.
The cooling inflation outlook led Australia's central bank to lower interest rates on Tuesday, its first easing since early 2009.
Figures from Indonesia also showed price pressures fading. Its central bank cut rates on October 11 in a surprise move, and left the door open to further easing.
Thailand's inflation accelerated in October, a consequence of heavy flooding, but the increase was not as sharp as economists had predicted.