Asia factory revive despite china’s slowdown

Asia factory

Strong demand for technology goods drove sustainable growth in Asia’s factories in February, but a downturn in China emphasized the challenges facing the region as it seeks a sustainable recovery from the COVID-19 pandemic blow.

Global vaccine rollout and demand upswing provided optimism for a vast number of businesses that had grappled for months with a cash-flow crunch and falling profits.

In Japan, manufacturing activity expanded at the fastest pace in over two years. Japan Manufacturing Purchasing Managers’ Index (PMI) jumped to 51.4 in February, up from the prior month’s 49.8 reading.

The rise in the headline figure, which compared to a preliminary 50.6 reading, marked the fastest expansion since December 2018.

South Korea’s exports rose 9.5% in February, suggesting the region’s export-reliant economies were benefiting from robust shipments of chips, autos and other key products global trade.

According to the data compiled by the Ministry of Trade, Industry and Energy of South Korea, exports came to $44.8 billion last month, compared with $40.9 billion a year earlier. 

Meanwhile, Philippines, Indonesia and Vietnam also saw manufacturing activity expand in February, a sign the region was gradually recovering from the hit of the pandemic.

On the contrary, China’s factory activity expanded at the slowest pace in nine months in February, as weak overseas demand and coronavirus flare-ups weighed on output.  

China is the first country to see economic recovery, so any signs of prolonged disruption in Asia’s engine of growth might be a cause for concern.

With the global rebound still in early stage, however, analysts say the outlook was brightening as companies increased output to restock inventory on hopes vaccine rollouts will normalise economic activity.

Shigeto Nagai, head of Japan economics at Oxford Economics said that the recovery in durable-goods demand is continuing, which is creating a positive cycle for manufacturers in Asia. 

He added that capital expenditure will gradually pick up as vaccine rollouts ease uncertainties over the outlook.

Damon Harrison
Market Analyst, IPG Group