Happy days ahead: economy best in four years and holding

A quarter (25%) of all Australian small and medium businesses (SMB) believe the economy is growing versus 16% who say it is slowing, resulting in the best net balance score (+9) since December 2013, according to the latest Sensis Business Index (SBI) survey.
It is the fourth quarter in a row where a positive net balance score has been recorded on this measure, while there was also a seven point increase in expectations of the economy in 12 months’ time to +16 – another four year high.
Sensis CEO John Allan said: “Small and medium businesses see strength in the economy, and this is revealed in their assessment of each of the key indicators, all of which – prices, sales, profitability, employment and wages – saw a rise in the net balance score both for last quarter and in expectations for the quarter ahead.
“For the majority of businesses, growth is driving further employment and the employment net balance has improved to its best result in more than five years.”
The Index reflects the views of 1,000 small and medium businesses from across Australia. It has also revealed that the business confidence score jumped seven points to sit at the equal highest level since March 2010. The net balance of +46 is calculated by comparing the number of confident SMB (61%) to those who are worried (15%).
Access to finance improved, with the good news it has become easier for many SMB to secure loans. Of the 12% of SMB who applied for finance, more than two thirds were successful.
“With the ability to access finance, a SMB owner can think about capital expenditure to grow their business, which in turn can drive more sales and flow on to requiring more employees, and so on,” said Mr Allan.
“While there is much about which SMB feel optimistic, there are still challenges and 12% say that a lack of work or sales is a key concern, whilst 8% are frustrated at the inability to find or keep staff.
“A number of state and territory governments are addressing this, rolling out training schemes to help build skills and capabilities useful to SMB. Many of the unprompted comments coming from SMB who believe their government’s policies are supportive cite the training programs that have been implemented as evidence.”
Across the nation, each state and territory saw a rise in business confidence, except WA where the score remained the same as last quarter. Looking more closely at the result, there was a 24 point reversal of confidence between metropolitan and regional SMB (+50 vs +39), with the cities leading the boost in confidence.
“Brisbane is the most confident city in Australia among SMB followed by the ACT, while regional NSW is more confident than Sydney – albeit dropping 19 points to a reduced difference of six points,” said Mr Allan.
“Unlike their metropolitan counterparts, regional SMB do not see the economy now or in 12 months as being strong. Nevertheless, in both locations positive expectations are indicated for this quarter on all five key performance indicators.”
All sectors continue to have a positive net balance with half of the industries improving this quarter. The Hospitality sector’s business confidence score almost tripled from last quarter from +21 to +62, while the Transport and Storage sector enjoyed a 26 point rise. Conversely, Retail Trade languishes at the bottom on +16, dropping one point.
Businesses saying Federal Government policies are supportive fell (22% to 18%), while those saying policies work against small business also fell (16% to 15%). As a result, the net balance was down three points to +3.
“SMB unimpressed with the Federal Government’s policies cited too much bureaucracy, too much of a focus on ‘big business’ and high taxation. Of those with a favourable assessment, the Federal Government was seen as supportive and interested in small businesses, making efforts to reduce tax, and offering tax incentives,” said Mr Allan.
At a state and territory government level, the Tasmanian Government returned to top spot with a seven point rise to a net balance of +16. Positive perceptions of the ACT Government dropped 12 points to +3, albeit it remains the second most popular government among SMB. The SA Government saw the biggest improvement with an 11 point rise, however, it remains the most unpopular of all the state and territory governments on -26.
“The employment and training schemes being offered to SMB were a key reason for the more positive disposition towards the Tasmanian and South Australian Governments this quarter,” said Mr Allan.
“As we head into the crucial Christmas period – especially for the Hospitality; Cultural, Recreational and Personal Services; and Retail sectors – business conditions are strong, hopefully ensuring a high level of confidence is maintained.”

3PL revenues to surpass $1.4 trillion by 2022

Research recently released by supply-chain market research firm Armstrong & Associates reveals that the global third-party logistics market is on track to exceed US$1.1 trillion ($1.4 billion) in 2022, having reach US$802 billion ($1.03 billion) in 2016.
The research, which covered seven major regions comprising 190 countries, found that global logistics costs were $8.2 trillion ($10.6 trillion) in 2016 and should surpass $11.1 trillion in 2022 ($14.3 trillion). Globally, the Asia Pacific region is the largest logistics market accounting for 39 per cent of total global logistics costs and 38 per cent of total global 3PL revenues.
The complete report can be found here.

Retail turnover rises, food leading

Australian retail turnover rose 0.3 per cent in June 2017 in seasonally adjusted terms, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures, following a rise of 0.6 per cent in May 2017.
“In seasonally adjusted terms in June 2017, we saw rises in Household goods retailing (0.9 per cent), Cafes, restaurants and takeaway food services (0.5 per cent), Clothing footwear and personal accessory retailing (0.8 per cent) and Other retailing (0.2 per cent),” said Ben James, director of quarterly economy-wide surveys. “There was a fall in Department stores (-0.3 per cent), while Food retailing (0.0 per cent) was relatively unchanged.”
In seasonally adjusted terms there were rises in New South Wales (0.5 per cent), Queensland (0.7 per cent), South Australia (0.3 per cent), Tasmania (0.6 per cent), the Northern Territory (1.2 per cent) and Western Australia (0.1 per cent). There were falls in Victoria (-0.3 per cent) and the Australian Capital Territory (-0.1 per cent).
The trend estimate for Australian retail turnover rose 0.4 per cent in June 2017 following a 0.4 per cent rise in May 2017. Compared to June 2016, the trend estimate rose 3.6 per cent.
Online retail turnover contributed 4.1 per cent to total retail turnover in original terms.
In seasonally adjusted volume terms, turnover rose 1.5 per cent in the June quarter 2017, following a rise of 0.2 per cent in the March quarter 2017. The largest contributor to the rise was Household goods retailing, which rose 2.5 per cent in seasonally adjusted volume terms in the June quarter 2017.
More detailed industry analysis and further information on the statistical methodology is available in Retail Trade, Australia (cat no. 8501.0).
Retailers are happy
Australian Retailers Association (ARA) executive director Russell Zimmerman said the June retail trade figures remain positive due to the continual growth in Food retailing.
“Although we see a robust 3.8% year-on-year growth overall, the main driving force of this increase stems from Supermarkets and grocery stores with a sturdy 4% growth year-on-year,” Mr Zimmerman said.
“As Food Retailing represents 40% of overall retail trade, this continual surge in Food Retailing reflects somewhat positively on the overall industry.”
The Household Goods category saw the strongest year-on-year increase with an overall 5.88% increase, this included a substantial growth in Furniture sales which received a 10.54% year-on-year increase.
“We usually see home owners increase their spending on household goods when housing values rise, and this month’s retail trade figures reflect the high consumer confidence home owners felt in June,” Mr Zimmerman said.
“Hardware figures also proved positive with a 3.73% year-on-year increase, their strongest retail trade figures since December since the closure of Masters around the country.”
Clothing Footwear and Personal Accessories figures dropped significantly in June with a 1.71% year-on-year increase, compared to the 3.76% year-on-year increase the category received in May.
“This substantial drop shows a very volatile retail market as the last few months sales have been driven by the weather and significant discounting,” Mr Zimmerman said.
“With Amazon recently purchasing land in Victoria, we know the retail market is changing and those retailers who redefine their businesses to adapt to the shifting environment will thrive in the dynamic retail landscape.”

ALC releases final submission for freight strategy Inquiry

The Australian Logistics Council (ALC) has released its final submission to the Inquiry into National Freight and Supply Chain Priorities: Freight Doesn’t Vote.
The submission makes 41 recommendations relating to all transport modes operating in the Australian freight logistics sector, as well as whole-of-industry issues.
“[The] ALC has long advocated for a National Freight and Supply Chain Strategy,” said Michael Kilgariff, Managing Director, ALC. “We are proud to release a comprehensive submission that clearly reflects industry’s priorities and offers practical suggestions for policy reform.
“The content of Freight Doesn’t Vote has been informed by an extensive process of industry engagement – including ALC Forum 2017 in March, dialogue with the Department of Infrastructure and Regional Development, and extensive consultations with members and the broader industry.
“The submission calls on the Commonwealth Government to play a greater role in protecting against urban encroachment and preserving critical freight transport corridors – a position that has also been endorsed by Infrastructure Australia (IA).
“It recommends reviewing a number of regulatory practices that inhibit the efficient movement of freight, such as curfews and bans on freight vehicles. It also identifies opportunities for the Federal Government to incentivise good planning practices and encourage the take-up of new technologies that can deliver better outcomes.
“The submission does not shy away from recommending initiatives that may be politically challenging – particularly around greater Commonwealth involvement in planning, as well as road pricing and investment reform.
“However, the reality is that Australia’s economy is being transformed by population growth, by technological change and by the changing behaviour of ever-more discerning and empowered consumers. Our supply chains must be equipped to deal with that reality.”
The full submission can be viewed on the ALC’s website.

Retail sales start turning the corner

Figures published in the 26th edition of the quarterly Australian Food and Grocery Council (AFGC) CHEP Retail Index indicate signs of a modest recovery in retail turnover growth in Australia as 2017 progresses. This follows a sustained period of softening growth over 18 months that has reflected uncertainty in Australian and global economies.
The Index, which uses transactional data from CHEP pallet movements to provide a lead indicator of Australian Bureau of Statistics retail trade data, predicts year-on-year growth in Australian retail turnover of 4.6% for the month of June 2017 and 3.6% year-on-year for the June quarter – which is up from a year-on-year rise of 2.6% to March 2017. This is projected to continue with year-on-year growth figures for the months of August at 4.2% and September at 4.1% respectively.
Despite a persistent degree of consumer caution and a competitive retail environment, Australia’s economic outlook over the coming 12 months is characterised by modest improvement, being boosted by factors such as a lift in global trade, China’s demand for commodities, inbound tourism as a result of strong economic growth in Asia, and growth in Australian household wealth.
Australian Food and Grocery Council chief executive officer Ms Tanya Barden said: “After a period of relatively subdued retail trade, it is encouraging to see signs of some positive momentum. We have seen food retail spending, in particular, pick up and fill some gaps from weaker non-food retailing, with catered food driving most recent improvements. Household goods have been the best performer for non-food retailing.”
President of CHEP Asia Pacific Phillip Austin said: “The reliability and efficiency of the supply chain continues to be a major factor in the success of Australia’s retail sector. Retail supply chains are already evolving to be more effective and sustainable in the face of increasing competition, emerging technologies and ever-changing consumer needs. This may accelerate as firms look to capitalise on the stronger momentum forecast by the Index.”

Highlighting the industry’s view

With the Federal Government having announced the composition of the expert panel that will advise on the development of the National Freight and Supply Chain Strategy, the real work of shaping its content is now well and truly under way.
It’s not indulging in hyperbole to say that we have a once-in-a-generation opportunity to get this right. Australia’s rapidly growing population coupled with changing patterns of consumer behaviour – especially with the growth of e-Commerce – will impose significant additional demands on the freight and logistics sector.
Indeed, the National Transport Commission (NTC) estimates that Australia’s freight task will grow by some 26 per cent in the next decade alone. When you think of the capacity constraints that are already evident in some of our major cities, particularly growing traffic congestion, such forecasts can appear daunting.
Although it will require a significant degree of hard work on the part of the freight and logistics industry, I am nonetheless confident that we can come up with solutions that will allow us to meet this burgeoning demand.
We know that industry is willing to play an active role, and we know that the Federal Government’s agreement to develop a National Freight and Supply Chain Strategy shows decision-makers are willing to listen to industry’s advice.
Thus, our immediate challenge is to make certain the advice we provide is the right advice, which will help ensure the Strategy that emerges is the right one for our industry and the right one for the Australian economy.
I think there has been an encouraging start on this front.
At the beginning of March, the ALC held its annual Forum in Melbourne, and the entire focus of the event was discussing the content of the National Freight and Supply Chain Strategy.
Of course, we are not starting with a blank piece of paper. Many of the attendees at the Forum are leading figures within Australia’s freight and logistics industry, and throughout their many years of collective experience they have garnered insights and evidence that will prove invaluable in terms of getting policy settings right.
Although ALC Forum 2017 was the first industry-wide gathering since the Prime Minister’s announcement last November that the Government would develop the Strategy, the discussions revealed there is already a remarkable degree of consensus across the industry about what is required to make it effective. This is a strong basis from which to work.
To help synthesise the industry’s conversations to date, the ALC has produced a Working Paper that summarises the views of industry to date about the contents of the Strategy.
Some of the major themes addressed in that publication are as follows:
Urban encroachment issues
In the lead up to the 2016 Federal Election, the ALC prepared a document called Getting The Supply Chain Right, which highlighted the freight and logistics industry’s most pressing priorities for an incoming government.
One of those was urban encroachment, and the lack of buffer zones, land separation setbacks and design mitigation measures around sensitive use developments, which can significantly hamper the efficient operation of freight-related infrastructure.
At the time, the ALC noted that the national freight supply chain will be unable to support Australia’s growing demand if facilities and infrastructure continue to be prevented from realising their optimal capacity, due to restrictions imposed on their use or operating conditions.
This includes things like night curfews for airfreight and port facilities, restrictive speed limits and the banning of heavy vehicles from key routes that provide access to freight facilities.
These things are often pursued by governments in search of an electoral boost. However, their long-term impact is to simply build inefficiencies into the supply chain, which ultimately results in higher consumer prices.
As industry ‘insiders’, we understand that there is a symbiotic relationship between good outcomes for freight efficiency and good outcomes for the community.
The problem lies in the fact that this is vastly underappreciated by the public at large, and even at times by decision-makers within government.
This is how we end up with poor planning outcomes, such as the failure to preserve freight corridors, and insufficient consideration of freight operations when pursuing ‘urban infill’ objectives surrounding new residential developments.
The freight and logistics industry needs to better ‘sell’ the fact that corridor preservation equates to improved safety, liveability and efficiency outcomes.
Technology issues
There was a broad consensus among participants at the Forum that not enough is being done to make use of data, both in terms of improving safety and efficiency across the supply chain, and also when it comes to effectively planning the nation’s freight infrastructure.
Of course, the top priority must be safety in the supply chain. Regrettably, Australia’s approach to safety in the trucking industry is lagging significantly behind that of other comparable nations. In particular, several participants at the Forum noted that Australia’s trucking industry is making insufficient use of telematics when it comes to making business decisions.
The ALC will continue to pursue a national telematics law, permitting the use of data about vehicle performance, equipment and driver behaviour that can be used to enhance road safety, improve efficiency within the logistics industry and identify problems with driver behaviour.
Technology also offers a potential way to overcome the impact of ever-more restrictive planning and vehicular access policies when it comes to CBD freight delivery. One detailed presentation discussed using urban consolidation/distribution stations. These can provide for multi-modal routing systems using bicycles, walkers and electronic vans to facilitate freight delivery.
It is far more efficient than using large vehicles to deliver small loads – especially given that an increasing number of large-scale residential developments do not incorporate delivery zones or provide access facilities for freight vehicles.
Rail issues
There is very strong support within the industry for construction of the Inland Rail, at last providing a port-to-port rail link from Melbourne to Brisbane. This project has had a long gestation, but with the increasing demand for freight resulting from free trade agreements and the growth of e-Commerce, encouraging more freight onto rail is vital.
Constructing the Inland Rail will help to cut freight transport times, reduce road congestion and promote cheaper consumer prices. There are also considerable economic benefits for regional communities along the route.
However, there are also opportunities elsewhere in the sector to make greater use of short-haul rail. This includes pursing projects like the duplication of the rail line at Port Botany, which will help achieve NSW Ports’ target of moving three million Twenty-foot Equivalent Units (TEU) by rail by the year 2045.
Pursuing a rail connection between the Port of Melbourne and three of Victoria’s inland ports will also be important in promoting supply greater supply chain efficiency and addressing road congestion.
This issue is especially important in the context of Asia’s rapidly expanding middle class, whose appetite for the type of high-quality agricultural goods Australia produces will be a source of growing demand on our freight and export infrastructure. We must be mindful not to cede our competitive edge in this area by failing to have a supply chain that operates safely and efficiently from paddock to port.
The next steps
The ALC believes that a dynamic Strategy requires a dynamic consultation process to guide its development, and accordingly the ALC will be continuing to engage closely with industry over the coming weeks and months to make sure we get the right outcomes.
However, from the conversation thus far, it’s already apparent that there are some clear expectations from industry.
Existing freight infrastructure needs to be made to operate efficiently, through making sure planning instruments not only identify and preserve the industrial lands to provide the jobs and logistics facilities of the future, but also ensure new residential developments do not encroach on infrastructure and prevent its effective utilisation.
It will also be necessary to establish some form of mandatory system of data collection that will allow better decision making and improved outcomes in safety, planning and investment decisions, all of which will help boost productivity.
We will need to move towards hypothecation of levies, fees, taxes and charges raised for the purpose of developing an identified piece of infrastructure – so that money raised is invested properly and not put back into consolidated revenue.
The construction of Inland Rail must continue to be treated as a priority, ensuring rail as a modality has a clear place in moving freight in the Australian supply chain.
Great Commonwealth leadership needs to promote supply chain safety and efficiency – this includes helping the public at large understand the importance of supply chain efficiency, as well as incentivising state jurisdictions to consider freight needs in their planning instruments by making Commonwealth funding support subject to conditions such as having corridor preservation strategies in place.
Finally, the establishment of a specific Federal Department of Planning and Infrastructure will allow the Commonwealth’s expertise in these areas (including the development of funding mechanisms) to be concentrated and properly able to be used as resource, by industry and by other jurisdictions.

Retail turnover rises 0.6 per cent in May

Australian retail turnover rose 0.6 per cent in May 2017, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures. This follows a rise of 1.0 per cent in April 2017.
In seasonally adjusted terms, there were rises in household goods retailing (2.2 per cent), clothing, footwear and personal accessory retailing (1.3 per cent), cafes, restaurants and takeaway food services (0.6 per cent), other retailing (0.6 per cent), and food retailing (0.1 per cent). These rises were offset by a fall in department stores (-0.7 per cent).
The rise in household goods was across all subgroups: electrical and electronic goods retailing (2.8 per cent), furniture, floor coverings, houseware and textile goods retailing (2.0 per cent), and hardware, building and garden supplies retailing (1.5 per cent).
In seasonally adjusted terms there were rises in New South Wales (1.3 per cent), Victoria (1.2 per cent), South Australia (0.8 per cent), Western Australia (0.3 per cent), Tasmania (1.2 per cent) and the Australian Capital Territory (1.0 per cent). There were falls in Queensland (-1.1 per cent) and the Northern Territory (-0.5 per cent) in May 2017.
The trend estimate for Australian retail turnover rose 0.3 per cent in May 2017 following a 0.3 per cent rise in April 2017. Compared to May 2016 the trend estimate rose 3.2 per cent.
Online retail turnover contributed 3.9 per cent to total retail turnover in original terms.
Winter sales better late than never: retailers
The Australian Retailers Association (ARA) said the positive trade figures released by the Australian Bureau of Statistics represent a better than expected trade in May with 3.82% total growth year-on-year.
ARA executive director Russell Zimmerman said the May retail trade figures illustrate a positive outlook for the industry as retailers head into winter.
“Retail figures have improved from April across the board with the cold winter snap driving consumers indoors,” Mr Zimmerman said.
Clothing Footwear and Personal Accessories figures have levelled out in May, showing a 3.76% increase year-on-year.
Household Goods (5.11%), Electrical (5.80%) and Furniture (8.62%) have seen the strongest year-on-year growth with many new electronic products launched to the public in late April.
Mr Zimmerman said the late arrival of cold weather might have had a positive effect on retail sales but some retailers are still not getting the sales volume they need due to the considerable amount of discounting happening across Australia.
“Although liquor has slowed down considerably as we move away from Easter, Supermarkets, Cafés Restaurants and Takeaway Food remain strong.”
May trade figures remained steady across the board with all states showing a stable growth. Australian Capital Territory (5.68%), Victoria (5.19%), South Australia (4.90%) and Tasmania (4.53%) lead the pack with modest year-on-year growth.
While New South Wales (3.93%) and Queensland (3.07%) also show a moderate year-on-year increase. Both Western Australia (0.98%) and the Northern Territory (0.62%) might trail behind the other state still show fairly stable figures.
“As we enter the colder months we will see retail growth remain strong, giving retailers breathing room in the tough trading environment,” Mr Zimmerman said.
“We look forward to seeing consumers take advantage of the end of financial year sales in June giving retailers another boost in sales.”

Manufacturing fightback: sector quietly adds 40,000 jobs

Polling: attitudes towards manufacturing policy options
A new report outlines the industry’s dogged resilience in difficult times, its importance to the Australian economy, and its more hopeful future prospects.
The report, A Moment of Opportunity, identifies several indicators that suggest that the economic opportunities for domestic manufacturing have improved significantly.
“Australia’s manufacturing industry faces some daunting domestic and global challenges. But it’s not just surviving, it’s finding a way to grow, adding 40,000 new jobs last year,” director of the Centre for Future Work Dr Jim Stanford said.
“That ranks manufacturing as the second biggest source of new jobs in Australia last year.
“Additionally, manufacturing re-invests 5% of its value added in R&D, the highest of any industry, making it an engine room for innovation in the economy.”
New polling released as part of the report shows that Australians are very supportive of pro-active, targeted policy measures to sustain and support manufacturing (see polling results).
“Perhaps influenced by the negative tone of much recent commentary, Australians consistently underestimate the size of manufacturing in Australia’s economy, relative to other industries, but nonetheless recognise the value of maintaining a strong manufacturing sector.
Specifically, there was strong support for targeted policies such as government procurement mandates (81%) and tax incentives tied to investments in domestic facilities (79%); support was strong across all age and voting groups.  Australians opposed measures to attract industry by cutting wages, environmental standards, or across-the-board taxes.  But measures focused on manufacturing, tied to Australian production and jobs, received overwhelming support – by a margin of up to five-to-one.
“Both economically and politically, the smart move would be for legislators to get behind local manufacturing with targeted policies to support Australian jobs, ” Dr Stanford said.

CSIRO study examines potential uses of blockchain technology

The Commonwealth Scientific and Industrial Research Organisation’s (CSIRO) Data61 has delivered a comprehensive review of how blockchain technology could be adopted across government and industry in Australia to deliver productivity benefits and drive local innovation.
In 2008, blockchain emerged as a technology to support digital currencies and it has quickly generated interest for its broad application offering secure transactions across various domains such as provenance of data, health records, banking, voting and government services.
Over the past year, CSIRO’s Data61 Australia’s data innovation group has engaged with industry and government to deliver two reports on the regulatory, technical and societal implications of using blockchain-based systems across various industries.
“The pace of change we are experiencing as a nation is exponential and we can’t afford to be followers in the adoption of emerging technology like blockchain,” said Adrian Turner, CEO of CSIRO’s Data61.
“It has potential to reframe existing industries like financial services and seed new ones like food provenance and personalised health.”
The Treasurer, the Hon Scott Morrison MP, said the reports would help Australia build on its existing position as a leader in developing blockchain technology.
“It will give decision-makers in business and government guidance on matters they need to consider in developing a system that uses blockchain technology,” he said.
“The reports demonstrate the benefits of this technology could be profound – delivering productivity, security and efficiency gains.
“We should all be interested in blockchain developments and its potential application, right across our economy.”
The first report developed by Rob Hanson and Dr Stefan Hajkowicz in Data61’s Strategic Insight Team explores four plausible adoption scenarios of blockchain technology in Australia in 2030 including: aspirational, transformative, new equilibrium and collapse.
“Scenarios allow decision-makers to consider, if similar possibilities were to occur, what should they do to prepare for the future ahead of time,” Hanson said.
“Most importantly, each scenario examines the aspects of critical uncertainty for the use of blockchain technologies: human behaviour, technology and development, regulation and user adoption.”
The second report takes a technical approach by exploring design alternatives for blockchain systems in three illustrative use cases: remittance payments, open data registries and agricultural supply chains.
“Looking at the range of critical requirements in these specific context helps us understand how blockchain-based systems can support new markets and business models,” said Dr Mark Staples, Group Leader, CSIRO’s Data61.
The study highlighted that the path towards widespread adoption is still not clear.
It was recommended that further trials of blockchain systems should demonstrate responses to ‘rainy day’ scenarios when problems arise like disputed transactions, incorrect addresses, exposure or loss of private keys.

World’s biggest ports sending mixed signals about the global economy

China’s struggles with its slackening demand and excess industrial capacity are jolting financial markets around the world and threatening to hit global supply chains.

Shares on global markets tumbled and currencies weakened on the first trading day of the year, making it more likely that Beijing will take stronger action to shore up the country’s economy.

That may include more action to shore up exports, an effort that will be helped by the decline in the Chinese yuan this week to its weakest level versus the dollar in nearly five years.

But the currency dive also pushed down other Asian currencies, raising fears that China will drag down neighbouring economies.

At the heart of the concern is the latest drop in a closely watched private index of Chinese manufacturing, which also showed measures that track production, new orders and new export orders all declined.

Economists say China is still trying to balance supply and demand, an effort that so far has its trading partners very much on edge.

While China’s manufacturing falters, U.S. factories are stumbling and signalling lighter activity in the coming months. The Institute for Supply Management’s gauge of manufacturing activity fell to 48.2 last month, the lowest level of the year.

The measure for new orders continued to contract in December while inventories and customers’ inventories both ticked upward. That suggests American businesses are hunkering down, waiting to see if demand justifies speeding up their supply chains.

The signs of hope came in export orders, which expanded after six months of decline, but that business faces big headwinds as the dollar remains strong and commodities prices sag.

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