Asian Factories Show Mixed Performance as Pandemic’s Pain Lingers

By Leika Kihara

TOKYO (Reuters) – Manufacturing in China and Japan suffered in January, while South Korea and Taiwan saw improvement amid a resurgence in coronavirus infections, underscoring the fragile nature of the region’s economic recovery.

Factory activity rose in major chip exporters South Korea and Taiwan, as they benefited from continued brisk demand for semiconductors crucial to work-from-home IT goods.

But China’s manufacturing activity expanded at the slowest pace in seven months in January, weighed down by falling export orders.

Japan also saw factory activity slip back into contraction as a new state of emergency, rolled out in January, hit operating conditions, PMI data showed on Monday.

“Manufacturers may slash output as the state of emergency will unavoidably hurt the economy,” said Takeshi Okuwaki, an economist at Dai-ichi Life Research Institute in Tokyo.

“A shortage of chip supply will take time to fix, which will also weigh on Japan’s automobile production,” he said.

China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) dropped to 51.5 last month, its lowest level since June last year and easing from December’s reading of 53.0.

Although it remains above the 50 mark that separates growth from contraction, the index was below a median market forecast for a reading of 52.7.

The survey broadly aligned with Beijing’s official PMI on Sunday, which showed the recovery in factory activity slowing as local COVID-19 cases rose.

Japan’s final au Jibun Bank PMI fell to 49.8 in January from the previous month’s 50.0 reading, as fresh state of emergency measures in areas accounting for 55% of the country’s population hurt employment and output.

That was in stark contrast to South Korea, where factory activity rose at its fastest pace in a decade thanks to soaring exports.

South Korea experienced its third and strongest wave of infections this winter but is seeing a gradual decline in new cases.

Manufacturing activity in Indonesia increased at a faster pace in January than in December, and such activity stopped contracting in the Philippines.

But activity shrank in Malaysia and rose at a slower pace in Vietnam, the PMI data showed.

China’s economy expanded at a faster-than-expected rate of 6.5% in the fourth quarter last year, as factories raced to fill overseas orders amid a surging pandemic.

But recovery hopes are being dampened by a sharp increase in COVID-19 cases as authorities race to impose lockdown measures to curb the spread of the virus in the country’s north.

(Reporting by Leika Kihara. Editing by Gerry Doyle)