Asia’s factory pain last month continued to ease with contraction slowing in big export-reliant nations, adding to hopes the region is steadily emerging from the devastating effects of the COVID-19 pandemic.
Manufacturing activity in China expanded at the fastest pace in nearly a decade as domestic demand improved, a private sector survey showed yesterday, suggesting that the world’s second-largest economy would help cushion the pandemic’s blow to world growth.
Worries about a second wave of infections might weigh on global demand and business sentiment, keeping any rebound in Asia’s factory output feeble, some analysts say.
Japan, for one, would enjoy only a “very gradual and protracted recovery” as concerns about a resurgence in COVID-19 cases would weigh on domestic and overseas spending, Oxford Economics senior economist Stefan Angrick said.
“With the pace of recovery slowing in some of Japan’s key trading partners, exports and business spending are likely to continue to struggle,” he said.
China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) last month rose to 52.8 from June’s 51.2, marking the sector’s third consecutive month of growth and the biggest jump since January 2011.
The upbeat findings echoed an official survey on Friday, adding to evidence the world’s second-largest economy is getting back on its feet faster than expected.
Japan and South Korea saw factory activity shrink at a much slower pace, a sign that pressures on manufacturers were easing and raising hopes the worst impact from the pandemic was over.
Japan’s final Jibun Bank Flash Manufacturing PMI last month rose to a seasonally adjusted 45.2 from 40.1 in June, marking the slowest pace of contraction in five months.
South Korea’s IHS Markit PMI rose to 46.9 last month from 43.4 in June, the highest reading since January, reflecting easing pressure on output and new orders.
A gauge of expectations for South Korea’s manufacturing output over the next 12 months jumped, though exports — which account for nearly 40 percent of the economy — remained a concern.
“Manufacturers maintained a bias towards price discounting and continued to take a cautious view on their staffing numbers,” IHS Markit economist Joe Hayes said.
Taiwan’s manufacturing activity rose above the 50 mark, which separates growth from contraction, suggesting that increased demand for work-from-home equipment is underpinning chip sales.
Factory activity in the Philippines and Vietnam slid last month, underscoring the patchy nature of the recovery.
India’s factory slump also deepened as renewed lockdown measures to contain surging virus cases weighed on demand and output.
“While the broad steadying of the PMI prints across the region point towards further stabilization in the regional manufacturing sector after the April-May malaise, the path ahead remains a rocky one, as evidenced by the more uncertain tone in the latest reading for some economies,” OCBC Bank Ltd (華僑銀行) economist Wellian Wiranto said.
The hit from lockdowns and social distancing policies to contain the virus has pushed many Asian economies into recession including Japan, South Korea, Thailand and Singapore.
While some countries have eased restrictions, a renewed spike in infections has cast a shadow over the recovery prospects in Japan.
Japan’s economy shrank at the same pace as previously estimated in the first quarter, according to a further revision of data that continued to show the country was in a recession before the pandemic took its heaviest toll.
Japan’s GDP shrank an annualized 2.2 percent in the first quarter compared with the final three months of last year, the Japanese Cabinet Office reported yesterday, with business investment showing more resilience than expected.
In nominal terms, GDP grew 0.5 percent in the first quarter, matching the earlier estimate.
Additional reporting by Bloomberg
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