Mixed economic news from Asia yesterday – more confirmation that the Chinese economy is growing, but as well, more confirmation from South Korea that it’s export dependant economy remains stalled as shipments fell sharply in November.
As well activity in manufacturing sectors outside China remains weak to plodding, suggesting that the impact of the pandemic on demand remains strong.
The Caixin/Markit monthly survey of small Chinese manufacturing companies (Monday’s official survey look at larger companies and has a larger survey base) for August saw a reading near a 10 year high in something of a shock for analysts and economists.
The Caixin China purchasing managers index rose to 53.1 in August from 52.8 in July. The reading was solidly supported by strong domestic and external demand and faster production activity.
The solid rise in China in the two surveys of manufacturing (and Monday’s official non-manufacturing survey showed a very solid reading) was in contrast to results from similar surveys across Asia.
Japan and South Korea both saw factory output contract at the slowest pace in six months as the impact from COVID-19 on demand globally remains weak.
While manufacturing activity rose in Taiwan and Indonesia, they slid in the Philippines, Vietnam and Malaysia.
Japanese companies cut capital expenditure by the most in a decade in the June quarter, data showed on Tuesday, a sign the pandemic continues to drain business confidence in future demand.
Japan is also facing a leadership change after Prime Minister Shinzo Abe said last week he will step down, raising uncertainty about the policy outlook.
August’s reading, the highest level since January 2011, marked the fourth consecutive month the Caixin PMI held above the 50 mark separating contraction from expansion.
Production and new orders expanded at faster rates in August than in July and companies reported the first increase in export sales in 2020.
Caixin said total new work hit its highest level since January 2011 as the domestic and global economy continued to recover from the coronavirus pandemic.
“Overall, the post-epidemic economic recovery in the manufacturing sector continued. Supply and demand expanded with the pickup in overseas demand,” Wang Zhe, a senior economist at Caixin Insight Group, said in a statement accompanying the data.
The employment subindex though was again negative for the eighth straight month, but it was the closest to positive territory this year as companies saw an upturn in backorders.
China’s official manufacturing PMI which focuses more on large, state-owned companies, edged down to 51.0 in August from 51.1 in July.
Meanwhile, South Korea’s exports declined at a sharper pace in August than the previous month largely due to fewer working days. But imports slumped sharply, underlining the weakness of demand in the export-driven economy.
Outbound shipments fell 9.9% from a year earlier to $US39.66 billion, a steeper decline than the June’s revised 7.1% fall. That was better than the 11.5% slide forecast by economists.
Imports fell 16.3% from a year earlier to $US35.54 billion in August after a revised 11.6% decline in July.
The country’s trade surplus was $US4.12 billion, larger than most market forecasts of around $US3 billion.
The trade ministry blamed the size of the fall in exports to one and a half fewer business days in August this year than last year.
South Korea’s latest PMI findings did not fully reflect a recent rise in domestic coronavirus inflections in mid-to late-August, so there could be a further slowing pace of activity in September.
