Fri, May 23, 2014 - Page 15 News List

China, Japan factory output better

STILL CONTRACTING:The sector is improving but still declining and it was the 13th month that manufacturing jobs were lost, which could inflame social instability

Reuters, BEIJING

China’s factory sector turned in its best performance this year this month, but still contracted for the fifth straight month, a survey showed yesterday, with divergent signals on exports and jobs pointing to an uncertain outlook for the Chinese economy.

A similar survey showed that Japanese factories had contracted slightly this month, but at a slower pace than last month, suggesting some improvement from the impact of a sales tax increase last month.

Asian shares rallied yesterday as data indicated an improvement in Chinese manufacturing activity and minutes from the US Federal Reserve showed that US officials are considering their policy options after the bank’s stimulus program ends.

Tokyo shares surged 2.11 percent, Sydney jumped 1.02 percent and Seoul gained 0.36 percent, while Hong Kong shares closed up 0.5 percent at their highest level in more than five weeks.

The HSBC-Markit Flash China Manufacturing Purchasing Managers’ Index (PMI) rose to 49.7 — its highest level since December last year — from a final reading of 48.1 last month.

The first reading of China’s economy for this month was much stronger than the median forecast of 48.1 in a Reuters poll. However, it hovered just below the 50-point level that separates growth from contraction, which showed a slight drop in business.

A breakdown of China’s PMI showed the handful of closely-watched indices that measure output, domestic and foreign demand in the world’s second-biggest economy all recovered sharply this month to rise back above 50 points.

New export orders had the biggest turnaround, climbing a hefty 3.4 points to 52.7, a level not seen since late 2010.

Yet parts of the PMI report were also cause for concern.

The employment index fell more than one point to be well under 50, the 13th consecutive month that jobs were lost in the manufacturing sector.

A deteriorating labor market would worry the Chinese government, as jobs growth is seen as important for social stability.

In Japan, manufacturing activity also contracted this month, but at a slower pace, in a sign of a tentative recovery after a sales tax hike last month led to a slowdown in consumer spending.

The Markit-JMMA flash Japan Manufacturing PMI rose to a seasonally adjusted 49.9 from last month’s reading of 49.4.

However, unlike China, the measures for output, new orders and new export orders all fell this month.

The index for new export orders fell to 48.2 from last month’s final reading of 49.1.

Yet there is growing evidence that any damage from the tax hike will be limited. A Reuters survey showed companies expect sales to bounce back and are more willing to raise wages.

The slightly more upbeat assessment from the Bank of Japan on Wednesday, when it kept its policy steady, also supports expectations that Asia’s second-biggest economy is improving, the mixed PMI report notwithstanding.

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