FILE PHOTO: On March 2, 2020, a laborer works on a production line at a factory of a shipbuilding company in Nantong, Jiangsu Province, China.
A private survey showed manufacturing activity in China expanded in August at the fastest clip in nearly a decade, as factories accelerated production. This year saw new export orders for the first time.
On Monday, contrary to an official survey, there were encouraging results, which showed that China’s factory activity had increased slightly in August.
Fear of a resurgence of transition in some economies could prevent firms from increasing capital expenditures and delay continued rebates for the Asian region, some analysts say.
“In most major economies except China, factories are still running below pre-pandemic capacity levels,” said Japan economist Ryutaro Kono, head of BNP Paribas.
“The recent recovery is largely due to increased demand following the removal of lock-up measures, which will further decrease.”
China’s Caixin / Market Manufacturing Purchasing Managers’ Index (PMI) increased from 52.8 in July to 53.1 in August, the largest rate of expansion since January 2011.
Both Japan and South Korea saw factory output contracts at the slowest pace in six months in August, with the expected export powerhouse of the region suffering the most from a drop in demand after COVID-19.
However, the spread-over to other parts of Asia remains patchy. While manufacturing activity increased in Taiwan and Indonesia, they slipped into the Philippines, Vietnam and Malaysia.
For the first time in five months in August, India’s factory production increased and demand for lockdown restrictions decreased. But analysts do not expect a quick change in the economy, which contracted at its fastest pace on record for the previous quarter.
PANDEMIC, POLITICS A group of snakes
The global economy is gradually emerging from a health-crisis-led recession to large-scale fiscal and monetary stimulus programs.
But many analysts expect any recovery as renewed waves of infectious dental activity may weaken and prevent many countries from fully opening up their economies.
In Australia, the central bank unexpectedly expanded a program on Tuesday to provide low-cost funds to lenders as the virus-hit economy caused its worst contraction since the Great Depression.
Japan’s last AU Jibun Bank manufacturing PMI reached 47.2 in August, adjusted from 45.2 in July, the slowest contraction since February.
The survey followed data on Monday, showing factory production booming in July, as automakers accelerated production after experiencing factory closures in previous months.
South Korea’s PMI also rose from 46.9 in July to 48.5 in August, the highest reading since February, although it remained below the 50-point threshold that separates growth from contraction for an eighth straight month.
Although South Korea’s exports fell for the sixth straight month in August, trade data – among the first major export economies to be reported – indicated a gradual recovery in global demand.
“Exports will continue during the second half and remain positive next year,” said Chun Qui-yeon, an economist at Hawn Financial Investment. “Global demand is clearly showing a recovery with economic recovery,” she said.
Some analysts warn against being too optimistic.
South Korea’s latest PMI findings did not fully reflect the recent revival in domestic coronoviruses from mid-August to late August.
Japanese firms cut the most capital expenditures in a decade in the second quarter, data show on Tuesday, a sign the epidemic was snapping up corporate hunger to spend.
Prime Minister Shinzo Abe said that last week he said that Japan is in the midst of a leadership change, increasing uncertainty about the policy outlook.
Fitch Ratings said in a research note, “… there is a risk that leadership change can bring about a period of policy paralysis and uncertainty, should Japan experience a steady change in the Premiership, as it did before 2012.” . ”
Reporting by Laika Kihara; Editing by Sri Navratnam