Asia Manufacturing Picks Up Pace as China Starts to Moderate

(Bloomberg) -- Factory activity across Asia continues to gain momentum, spurred by strong demand for the region’s exports, while China’s recovery is starting to moderate.

Japan’s purchasing managers index rose to 50 in December, its highest reading since April 2019, according to Jibun Bank and IHS Markit. Taiwan’s PMI jumped to 59.4, its highest mark in a decade, while South Korea’s remained at 52.9, its third consecutive month above the 50 level that separates contraction from expansion.

Still, with China’s factory growth starting to ease after expanding strongly in recent months, production in the rest of the region could cool going forward. China’s official manufacturing gauge fell to 51.9 in December from a three-year high of 52.1 in the previous month, the National Bureau of Statistics said last week, while the Caixin Media and IHS Markit PMI fell to 53 from 54.9 in November, dragged down by weaker output and new orders.

South and Southeast Asia’s economies showed mostly marginal improvement last month, with India’s gauge rising to 56.4 from 56.3 and Indonesia advancing further into expansion at 51.3 from 50.6. Thailand’s PMI gained and Vietnam lurched back into expansion, while the Philippines slipped slightly and is still in contraction territory. Malaysia’s index rose in December but remained below 50.

What Bloomberg Economics Says...

“Purchasing managers’ indexes for December show Asia’s manufacturing sector persevering even as the coronavirus pandemic worsened... The coming months will remain challenging as surges of infections in the region and beyond undermine demand.”

-- Chang Shu, chief Asia economist

To read the full note, click here

The data are in line with the Bloomberg Trade Tracker, which showed robust healing from the pandemic in the second half of 2020, especially among Asian economies. Eight of the 10 gauges on the tracker are at or above their long-run normal ranges.

As a bellwether for global trade, South Korea’s PMI reading is often held up as a gauge for future demand. Firms reported further increases in both output and new orders in the latest survey period, according to Usamah Bhatti, an economist at IHS Markit.

“South Korean goods producers remained optimistic in their outlook for activity over the coming 12 months, as the pandemic fades further and new products are launched,” Bhatti wrote in a release.

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