Manufacturing output : Asia faces challenging business climate

BEIJING: Asia’s manufacturers face a challenging business climate in the coming months, a clutch of surveys suggested on Friday, with China’s vast factory sector managing only a shallow rebound at the start of 2013 as feeble foreign demand dragged on sales.

Two separate versions of China’s purchasing managers’ index (PMI) showed on Friday that factory output in the world’s second-biggest economy rose in January, but the pace of the revival in activity was uneven.

The patchy nature of the recovery on Chinese factory floors was repeated in other PMI releases across Asia. Surveys showed manufacturing growth slowed or stalled in India and South Korea, Asia’s third- and fourth-largest economies respectively. Factories in Indonesia, the star emerging economy of the past year, said business shrank in January from December for the first time in eight months, while manufacturers in Taiwan reported the fastest growth in 10 months.

“January’s PMI does raise some red flags about the state of the economy,” Alistair Thornton, an economist at IHS Global Insight in Beijing, said in reference to the Chinese economy. “Things look a little shaky.” China’s official PMI released by the government’s statistics bureau showed factories grew slower-than-expected in January, with a reading of 50.4, easing from December’s 50.6 and below forecasts for a nine-month high of 50.9.

The official PMI has been above the 50-point level demarcating growth or contraction from the previous month since August 2012, though its failure to break above 51 indicates that the economic expansion it signals is only moderate. A private sector PMI released by HSBC, on the other hand, rose to a two-year high of 52.3.

Trade prospects: Trade prospects in China, the world’s biggest exporter, appeared darker than those elsewhere. The twin Chinese PMIs showed export orders either grew marginally or shrank in January as shoppers in the United States and Europe, the two biggest buyers of Chinese goods, cut back spending.

Domestic demand, on the other hand, was the main force behind China’s gentle economic rebound, driving growth in new orders in January to multi-month highs. The new orders sub-index in the official PMI inched up to a nine-month high of 51.6, while that for the HSBC PMI climbed to a two-year high of 53.7.

With domestic demand resilient, price pressures were shown building in China. The HSBC PMI showed the input prices sub-index jumping to its highest since September 2011, while the official PMI showed the input price sub-index zooming to a 17-month high of 57.2.

Uneven growth: Friday’s data showed India is as vulnerable as China to an export slump, especially as demand from Europe crumbles.

Growth in Indian factories eased to a three-month low of 53.2 in January, retreating from December’s six-month high of 54.7, as new export orders slowed. “The growth momentum in the manufacturing sector eased in January as a slower expansion in new orders slowed output growth,” Leif Eskesen, an economist at HSBC, said of India’s PMI.

In Taiwan, one of the world’s top makers of electronics, the PMI zoomed to a 10-month high of 51.5 as factories raised output markedly. Total new export orders also rose for the second month in January, but after adjusting for seasonality growth was marginal at best.

Factories in South Korea, home to some of the world’s leading suppliers of smartphones, cars, ships and electronic goods, fared better with overseas buyers, reporting their first growth in export orders in eight months. Even with stronger export demand, however, the South Korean PMI edged down to a seasonally adjusted 49.9 in January from 50.1 in December.

Indonesian manufacturers also said they received more orders from abroad, but despite that growth in factories stalled for the first time since May.

The Indonesian PMI retreated to 49.7 from 50.7 in December as domestic demand in Southeast Asia’s largest economy dragged. “Strong export orders appear to have offset a moderation in domestic orders, which may have been partially impacted by the Jakarta floods,” said Su Sian Lim, an economist at HSBC. reuters

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