Weak factory activity in Asia, and uncertainty about China clouds the outlook

An employee works on a production line to fabricate steel structures at a factory in Huzhou, Zhejiang Province, China on May 17, 2020. Photo taken on May 17, 2020. China Daily via Reuters/File Photo Obtaining licensing rights

  • China’s PMI unexpectedly expanded in November
  • Manufacturing activity declined in Japan and stabilized in South Korea
  • Weak global demand casts a shadow over the outlook for a fragile recovery in Asia

TOKYO (Reuters) – Factory activity in Asia remained weak in November due to weak global demand, surveys showed on Friday, while mixed signs of strength in China’s economy clouded the region’s fragile recovery prospects.

China’s Caixin/S&P global manufacturing PMI unexpectedly rose to 50.7 in November from a reading of 49.5 in October, surpassing the 50 mark that separates growth from contraction and beating analysts’ expectations.

The reading came a day after an official survey showed a contraction in the activity of manufacturers and non-manufacturers, highlighting the worsening problems in the world’s second-largest economy.

Dan Wang, chief economist at Hang Seng Bank China, said of China’s PMI readings, which samples vary.

Surveys showed that export-reliant Japan, South Korea and Taiwan bore the brunt of the slowdown in global demand, with their industrial activity remaining stagnant in November.

“It is difficult to expect a recovery in Asia any time soon,” said Toru Nishihama, chief emerging markets economist at Dai-ichi Life Research Institute. “Although exports may be bottoming out, they will not accelerate much from here because the global economy lacks a major driver of growth.”

Japan’s Jibun Bank’s final manufacturing PMI fell to 48.3 in November from 48.7 in October, contracting at the fastest pace in nine months.

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South Korea’s PMI reached 50.0 in November, up slightly from October’s reading of 49.8. The factory gauge rebound came after 16 straight months of contraction through October, the longest decline since the survey began in April 2004.

Surveys showed that manufacturing activity also contracted in Taiwan, Vietnam and Malaysia, but expanded in India, Indonesia and the Philippines.

Reuters graphics

The Chinese economy is struggling this year to mount a strong post-pandemic recovery, adding gloom to an already bleak global outlook, as the US and European economies begin to feel the brunt of previous strong interest rate increases.

“The weakness in China’s services sector is particularly worrying, because it shows that demand is evaporating even as supply rises,” said Nishihama of the Dai-ichi Life Research Institute.

In India, a PMI survey released on Friday showed the country’s manufacturing growth accelerated in November thanks to strong production and new orders.

While domestic demand appeared strong, international demand took a hit, with new export orders falling to their lowest level in five months.

(Reporting by Leika Kihara) Editing by Jimmy Freed

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