The pent-up demand drives the global reactivation of factories – tech2.org

The pent-up demand drives the global reactivation of factories


LONDON / TOKYO (Reuters) – Demand for manufactured goods fueled extended factory growth in Europe and Asia in February, but a slowdown in China underscored the challenges countries face as they seek a sustainable recovery from the COVID-19 pandemic hit. .

FILE PHOTO: Employees wearing masks work at a component manufacturer SMC’s factory during a government-organized visit to its facilities following the outbreak of the coronavirus disease (COVID-19), in Beijing, China, on May 13, 2020. REUTERS / Thomas Peter / File Photo / File Photo

Restrictions imposed around the world to try to quell the spread of the coronavirus have shut down vast swaths of the service industry, meaning that support for economies has fallen on manufacturers.

But vaccine launches and rebounding demand provided optimism for companies that have grappled with a contraction in cash flow and falling profits for months.

The final IHS Markit Manufacturing Purchasing Managers Index (PMI) jumped to a three-year high of 57.9 in February from 54.8 in January, beating the initial estimate of 57.7 “flash” for one of the highest readings in the 20 years of survey history. [EUR/PMIM]

German manufacturing activity also hit a three-year peak last month and in France the pace of growth accelerated. Italy and Spain also saw a rebound.

However, lockdown measures disrupted supply chains and factories found it difficult to source raw materials, leading to a large increase in delivery times.

“Delays in international shipments and strong global demand for raw materials have held back manufacturers around the world,” said Samuel Tombs of Pantheon Macroeconomics.

Factories in Britain, outside of the euro zone and the European Union, reported the slowest production growth since May last month. Disruptions and rising costs linked to Brexit and COVID-19 limited its ability to respond to a modest recovery in orders. [GB/PMIM]

ASIAN RECOVERY

Manufacturing activity in Japan expanded at the fastest pace in more than two years, and South Korea’s exports rose for the fourth month in a row, suggesting that economies dependent on Asian exports are benefiting from strong global trade.

On the other hand, China’s manufacturing activity grew at the slowest pace in nine months, hit by an internal COVID-19 outbreak and weak demand from countries under renewed lockdown measures.

“Overall, the softer pace of activity in (Chinese) manufacturing printing today is likely to be temporary, and we expect growth momentum to pick up thanks to a broader recovery in domestic demand and global demand,” said Erin Xin, an economist at HSBC.

“However, household consumption, while recovering, has not yet fully reached pre-pandemic growth levels due to continued pressure from the labor market.”

China was the first major economy to lead the recovery from the impact of COVID-19, so any signs of prolonged cooling in Asia’s growth engine are likely to be cause for concern.

With the global rebound still in its infancy, analysts said the outlook was encouraging as companies increased production to replenish inventory in hopes that vaccine launches would normalize economic activity.

“The recovery in demand for durable goods continues, which is creating a positive cycle for manufacturers in Asia,” said Shigeto Nagai, director of Japanese economics at Oxford Economics.

“As vaccine launches ease uncertainties about the outlook, capital expenditures will gradually increase. That will benefit Japan, which is strong in capital goods exports, ”he said.

China’s Caixin / Markit manufacturing PMI fell to 50.9 in February, the lowest level since last May, but still above the 50 mark that separates growth from contraction.

Activity in other parts of Asia remained dynamic.

Japan’s PMI jumped to its highest level since December 2018. In South Korea, a benchmark for regional exports, shipments rose 9.5% for the fourth consecutive month of growth.

India’s manufacturing activity expanded for the seventh consecutive month due to strong demand and increased production, although an increase in input costs could affect corporate profits going forward.

The Philippines, Indonesia and Vietnam also saw manufacturing activity expand in February, a sign that the region was recovering from the initial blow of the pandemic.

Reporting by Jonathan Cable and Leika Kihara; edited by Shri Navaratnam, Larry King

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