IHS Markit released purchasing managers’ indices (PMIs) for several countries on Monday (4), and factory activity across Asia continued to gain momentum well, spurred by strong demand for goods exported from the region, while conversely, China’s recovery began to slow down.
Japan’s PMI rose to 50 in December, the highest reading since April 2019, according to Jibun Bank and IHS Markit. Taiwan‘s PMI, meanwhile, was seen at a decade-high level of 59.4, while South Korea’s PMI remained at 52.9, the third consecutive month above the 50 boom-and-bust cutoff.
China’s latest Caixin PMI for December last year was 53, 1.9 percentage points slower than the decade-long high of November last year, and below market expectations of 54.7, but still at a high level in recent years. Given that China’s industrial growth has started to slow after strong expansion in recent months, production in the rest of Asia may cool down in the future. Data released earlier by the National Bureau of Statistics showed that China’s official manufacturing PMI fell back to 51.9 in December from a three-year high of 52.1 set the month before.
Southeast Asian economies also improved slightly last month, with Indonesia’s PMI rising to 51.3 from 50.6. Thailand’s PMI rose and Vietnam returned to expansionary territory, while the Philippines slipped slightly and remained in contractionary territory. Malaysia’s PMI rose in December, but remained below 50.
The study said that despite the worsening of the New Guan (CCP virus) outbreak, the PMI in December showed that the Asian manufacturing sector is still picking up, and will remain challenging in the coming months as a surge in cases locally and elsewhere weakens demand. In addition, economists see the indicator as evidence of a strong global economic recovery from the outbreak in the second half of 2020.
South Korea’s PMI is often used as an indicator of future demand, and IHS Markit economist Usamah Bhatti said companies reported further increases in output and new orders during the most recent survey. South Korean producers remain optimistic about the outlook for activity over the next 12 months as the outbreak further subsides and new products are introduced.
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