Wed, Sep 02, 2020 page10

• Asian factories shake off gloom

  RECOVERY: Manufacturing activity in China last month expanded at the fastest rate in nearly a decade, while India’s factory output grew for the first time in five months

  • Reuters, TOKYO
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  Asian factories last month continued to shake off the COVID-19 gloom as more bright signs in China raised hopes of a firmer recovery in global demand, reducing pressure on policymakers to take bolder steps to avert a deeper global recession.

  Manufacturing activity in China last month expanded at the fastest rate in nearly a decade, as factories ramped up output to meet rebounding demand, a private survey showed.

  New export orders rose for the first time this year.

  However, fears of a resurgence of COVID-19 infections in some economies could discourage firms from boosting capital expenditure and delay a sustained rebound for Asia, some analysts said.

  “In most major economies, except for China, factories are still running well below pre-pandemic capacity levels,” BNP Paribas SA chief Japan economist Ryutaro Kono said. “The recent recovery is largely due to pent-up demand after lockdown measures were lifted, which will dwindle ahead.”

  China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 53.1 last month from July’s 52.8, marking the biggest rate of expansion since January 2011.

  Japan and South Korea both saw factory output last month contract at the slowest pace in six months, reinforcing expectations the region’s export powerhouses have passed their worst after a collapse in demand when the pandemic struck.

  Japan’s au Jibun Bank Manufacturing PMI rose to a seasonally adjusted 47.2 last month from 45.2 in July, marking the slowest contraction since February.

  The survey followed data on Monday showing that Japanese factory output rose in July at the fastest pace on record, as automakers ramped up production after facing factory closures in previous months.

  South Korea’s PMI also rose to 48.5 last month from 46.9 in July, the highest reading since February, though it remained below the 50 threshold that separates growth from contraction for an eighth straight month.

  While South Korea’s exports last month fell for a sixth straight month, the trade data — the first to be reported among major exporting economies — signaled a gradual recovery in global demand.

  “Exports will continue to recover during the second half and turn positive next year,” Hana Financial Investment Co economist Chun Kyu-yeon said. “Global demand is clearly showing recovery along with economic resumptions.”

  However, the spillover to other parts of Asia remains patchy.

  While manufacturing activity rose in Taiwan and Indonesia, it slid in the Philippines, Vietnam and Malaysia.

  India’s factory output grew last month for the first time in five months as the easing of lockdown restrictions spurred demand, but analysts do not expect a quick turnaround in the economy, which contracted at its steepest pace on record last quarter.

  The global economy is gradually emerging from the pandemic-led downturn thanks in part to massive fiscal and monetary stimulus programs, but many analysts expect any recovery to be feeble as renewed waves of COVID-19 infections dent business activity and prevent many nations from fully reopening their economies.
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