Asia factory activity weakens, uncertainty on China clouds outlook

Employee works on a production line manufacturing steel structures at a factory in Huzhou

An employee works on a production line manufacturing steel structures at a factory in Huzhou, Zhejiang province, China May 17, 2020. Picture taken May 17, 2020. China Daily via REUTERS/File Photo Acquire Licensing Rights

  • China’s private PMI unexpectedly expands in November
  • Manufacturing activity slumps in Japan, steadies in S. Korea
  • Soft global demand clouds outlook for Asia’s fragile recovery

TOKYO, Dec 1 (Reuters) – Asia’s factory activity remained weak in November on soft global demand, surveys showed on Friday, with mixed signs on the strength of China’s economy clouding the outlook for the region’s fragile recovery.

China’s private Caixin/S&P Global manufacturing purchasing managers’ index (PMI) unexpectedly rose to 50.7 in November from a 49.5 reading in October, exceeding the 50 mark separating growth from contraction and surpassing analysts’ forecasts.

The reading came a day after official survey that showed a contraction in both manufacturers’ and non-manufacturers’ activity, underscoring deepening troubles in the world’s second largest economy.

“The domestic market cannot make up for losses in Europe and the United States. The data shows that factories are producing less and hiring fewer people,” Dan Wang, chief economist at Hang Seng Bank China, said of China’s PMI readings, which have different samples.

Export-reliant Japan, South Korea and Taiwan bore the brunt of sluggish global demand with their manufacturing activity remaining stagnant in November, surveys showed.

“It’s hard to expect a recovery in Asia any time soon,” said Toru Nishihama, chief emerging market economist at Dai-ichi Life Research Institute. “While exports probably hit bottom, they won’t accelerate much from here as the global economy lacks a key driver of growth.”

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

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

Manufacturing activity also shrank in Taiwan, Vietnam and Malaysia, but expanded in Indonesia and the Philippines, the surveys showed.

China’s economy has struggled this year to mount a strong post-pandemic recovery, adding gloom to an already darkening global outlook as U.S. and European economies begin to feel the pinch from past aggressive interest rate hikes.

“The weakness in China’s service sector is particularly worrying, as it shows demand is evaporating even as supply picks up,” Nishihama of Dai-ichi Life Research Institute said.

Reporting by Leika Kihara; Editing by Jamie Freed

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