Asia Manufacturing Activity Holds Up Even as China PMIs Cool

(Bloomberg) -- Factory activity across much of Asia continued to hold up in January even as China’s output showed signs of moderating.

Taiwan’s IHS Markit January manufacturing purchasing mangers’ index rose to 60.2 from 59.4 in December, its highest reading since April 2010. South Korea’s rose to 53.2 from 52.9, the most since February 2011. Both were well above the 50 level that separates contraction from expansion.

There were also gains for India, which rose to 57.7 from December’s 56.4, expanding for a sixth straight month; Indonesia, which rose to 52.2 from 51.3 -- its highest reading since July 2014; and the Philippines, which increased to 52.5 from 49.2, its highest level since December 2018.

“Asian industry looks likely to remain strong in the near term, helping economic recoveries to stay on track,” Capital Economics’ Asia economist Alex Holmes wrote after the data. “Buoyant global demand for electronics – a key driver of strong industrial output – will probably fade slightly further ahead, as the virus is suppressed by vaccination and some consumer spending switches back to services. But this will be gradual and is unlikely to happen for a few months.”

Still, there was some evidence of slowdown elsewhere. Japan’s purchasing managers index fell back into contraction at 49.8 in January from 50 the previous month, according to Jibun Bank and IHS Markit. Vietnam’s reading moderated to 51.3 from 51.7 -- though it remained in expansionary territory for a second straight month -- and Thailand fell to its lowest reading since July at 49, compared to 50.8 the previous month.

What Bloomberg Economics Says...

“We expect Asian manufacturing to remain solid in the coming months, with domestic economies for the most part extending their recoveries and export demand largely holding up. The challenge -- and risks -- may partly be in riding out a near-term slowdown in China.”

-- Chang Shu, chief Asia economist

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That softening comes as China factory output cools as efforts to control a recent resurgence of Covid-19 undercut the recovery. Data released Sunday by the National Bureau of Statistics showed January’s PMI fell to 51.3 from 51.9 in December, while the non-manufacturing gauge dropped to 52.4 from 55.7.

An alternate reading of China factory data issued by Caixin, which gives more weight to smaller enterprises, fell to 51.5 from 53, its lowest reading since June.

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