Activity in China’s vast factory sector grew for the first time in nine months last month to bring a hint of spring to the global economy, though a renewed chill in Japanese industry led to a muted response in financial markets.
Headlining in Asia was a rise in the official version of the Chinese purchasing managers’ index (PMI) to 50.2, beating forecasts and above the 50-point mark that separates growth from contraction.
The private Caixin/Markit PMI found output, total new orders and output prices all returned to growth, while a survey of the service sector surprised with its strength.
Photo: AFP
“It does seem to indicate that the manufacturing sector is warming up a bit,” Australia and New Zealand Banking Group senior economist Raymond Yeung (楊宇霆) said in Hong Kong. “New orders were up 2.8 points, which is a very strong figure.”
“We think there are basically two factors driving the recovery: the first is a possible acceleration in infrastructure spending. The second is a broader pickup in external demand,” he said.
That should be of some comfort to US Federal Reserve Chair Janet Yellen, who this week cited the global risks emanating from China as one reason to be cautious on raising US rates.
Yet, the market largely shrugged off better-than-expected Chinese manufacturing data and China watchers still suspect more support will be needed from Beijing, especially if it wants to avoid a politically unsettling rise in unemployment.
Ratings agency Standard & Poor’s underlined the need for faster reform when it changed China’s credit outlook to “negative” from “neutral” on Thursday.
The economic pulse across the rest of Asia was more erratic. South Korea’s PMI bounced to within a whisker of 50 last month, while stronger shipments of smartphones and steel saw exports decline at the slowest pace in four months.
Indonesia put an end to 17 straight months of contraction as its PMI popped up to 50.6, with output, new orders and employment all improving.
However, Japan was busy going backward as the Markit/Nikkei PMI of 49.1 was the lowest since February 2013.
That echoed a gloomy Tankan survey of manufacturers from the Bank of Japan (BOJ) that found sentiment at its darkest in nearly three years, a result that lopped 3 percent off the Nikkei.
The benchmark Nikkei 225 index ended lower for the fourth straight session, dropping 594.51 points to 16,164.16. Over the week, it lost 4.93 percent.
All of which heightened pressure on Japanese Prime Minister Shinzo Abe and the central bank to do more to shore up the stuttering economy.
“This data confirmed the very cautious stance of Japanese firms reflecting the market volatility since January. There’s no signs of corporate sentiment bottoming in coming months,” SMBC Friend Securities Co chief market economist Mari Iwashita said. “There’s more than a 50 percent chance the BOJ will consider easing policy further this month.”
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