Sat, Nov 02, 2013 - Page 15 News List

Asia factory sector upbeat, led by China

Reuters, BEIJING

Asian manufacturing activity picked up last month, led by China, where factory sector growth hit its fastest pace in 18 months off the back of new orders, purchasing managers’ reports showed yesterday.

The surveys provide a more upbeat view of world demand following a month in which a political standoff in Washington over the US debt ceiling and the sixth straight cut in IMF global economic forecasts had raised fresh concern about the health of the global economy.

China’s official purchasing managers index (PMI) rose to 51.4 last month, up from 51.1 in September and above expectations for a reading of 51.2. A PMI reading above 50 suggests expansion from the previous month, while a figure below 50 points to contraction.

“With global demand momentum likely to pick up gradually and domestic demand growth remaining solid, we expect GDP growth to comfortably exceed the [Chinese] government’s bottom line in the coming quarters,” said Louis Kuijs, an economist at RBS, of the China PMI in a client note.

The China PMI offered some support to weak Asian markets yesterday and data elsewhere in Asia also pointed to brighter economic prospects.

Factory activity in Taiwan — a major exporter and key to many global tech supply chains — was running at its fastest pace since March last year, while Japan’s factory activity also grew at the fastest pace in more than three years last month, reports showed.

The HSBC/Markit PMI for South Korea showed factory activity expanded for the first time in five months and separate data showed the country’s exports last month handily beat expectations to hit a record high of US$50.5 billion.

The rise in China’s official PMI offered some relief to the growth outlook for the economy after a disappointing run of data last month, which included an unexpected slide in exports.

A breakdown of the subindexes showed that new orders in large industries reached 53.8, while for small industries the number was just 48.8, suggesting larger firms are benefiting more from the stabilizing economy.

“The PMI data for October shows a continued increase, indicating a preliminary stabilization in the economy,” said Zhang Liqun (張立群), an economist at the cabinet think-tank Development Research Center, in a statement released with the PMI. “The foundation for a recovery is not yet solid.”

The HSBC/Markit PMI for China rose to 50.9 last month from 50.2 in September, suggesting factories were humming at their strongest pace in seven months. The figures showed a surprise jump in new export orders, with many factories reporting stronger demand from the US.

However, India was the exception among a group of generally upbeat PMI reports in Asia, with HSBC/Markit PMI for the country unchanged at 49.6 last month, indicating the sector was contracting.

Although new exports orders picked up sharply, the PMI reading showed manufacturing activity shrank for a third straight month, a further sign of a slowdown in Asia’s third-largest economy.

HSBC’s chief economist for India, Leif Eskesen, said inflation suggested the central bank, the Reserve Bank of India (RBI), would not have room to provide any support for growth.

“Input price inflation accelerated further despite the weak growth backdrop, as the effects of the depreciated exchange rate continue to pass through. This suggests that the RBI has to continue its staring contest with inflation,” Eskesen said.

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