NE Asia manufacturing recovery set to continue after Oct expansion


SINGAPORE (ICIS)–Manufacturing conditions in
northeast Asia continued to recover in October
but external demand in the months ahead could
be dampened on fresh lockdowns in the US and
Europe as coronavirus infections surge.

China’s official manufacturing purchasing
manager’s index (PMI) moderated slightly to
51.4 in October from 51.5 in September, while
the
non-official Caixin PMI rose to 53.6 in
October
from 53.0 a month earlier.

A PMI reading above 50 indicates an expansion
in the manufacturing economy.

Solid exports on the back of demand from the
worst flooding in decades, pent-up demand from
Covid-19 and governmental stimulus measures all
contributed to solid official PMIs in recent
months, which suggest China’s growth recovery
is largely on track.

“An extended pandemic may eventually dampen
demand for China’s exports if the purchasing
power in overseas economies diminishes and they
adjust their manufacturing to the new normal,”
said Japan’s Nomura Global Markets Research.

“We expect China’s official manufacturing PMI
to remain near 51.0 over the next couple of
months as drivers offset drags while the
official non-manufacturing PMI may slide,” it
said.

Chinese media group Caixin said that the latest
upturn in overall sales was the sharpest since
November 2010, with panellists surveyed for its
PMI widely commenting that market conditions
continued to recover from the pandemic earlier
in the year.

“There were reports that the pandemic and
rising infection rates across external markets
had dampened growth of new business from
overseas,” it said.

The second wave of coronavirus infections in
Europe and the third wave in the US have
significantly suppressed China’s overseas
demand, Caixin said.

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Virus cases continue to surge across the US and
Europe, with rising hospitalisations and death
rates, prompting governments to re-impose
lockdowns and restriction measures last week.

France has declared a second national lockdown
until end-November while Germany’s partial
lockdown is set to begin on 2 November.

England over the weekend announced a four-week
lockdown.

In Asia, the average of new daily cases
continued to decline in India and the
Philippines, while infections have stabilised
in Indonesia.

Manufacturing conditions in South Korea, Japan
and Taiwan continued to improve in October,
with manufacturers reporting a more optimistic
outlook in factory activity over coming months.

In Japan, the rate of contraction in
manufacturing activity  in October was the
softest since January, Japanese bank au Jibun
Bank said on Monday.

The
headline au Jibun Bank Japan manufacturing
PMI
improved to 48.7 in October from 47.7
in September, supported by softer falls in
output and new work.

“An encouraging finding in October was the
sustained improvement in business optimism,”
Usamah Bhatti, an economist at financial
information services provider IHS Markit said.

“Japanese manufacturers will be particularly
buoyed by the return to growth in export
orders, as demand across key overseas markets
such as China picked up,” Bhatti said.

At 51.2 in October, up from 49.8 in September,
the
South Korea manufacturing PMI moved into
expansion territory
for the first time
since December 2019.

South Korea’s manufacturing sector was
bolstered by a return in overseas demand and
while the latest data only a fractional
increase, signalled
increasing demand in key export markets such as
the US and China, IHS Markit said.

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In Taiwan, the manufacturing PMI was
little-changed from September’s
two-and-a-half-year high of 55.2, posting at
55.1 in October.

The latest increase in production was the most
marked since December 2016, indicating that
growth was driven by greater inflows of new
work and the resumption of projects that had
been delayed due to the pandemic.

Total new orders at Taiwan’s factories 
expanded for the fourth month running in
October, on stronger domestic and international
demand, especially from China, Europe, Japan
and the US.



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