Asia’s factories see modest pickup alongside Chinese rebound

Factory managers in Asia broadly saw a modest pickup in activity in July as China’s demand kept up its momentum.

PMIs for Japan, South Korea, and Taiwan—among the region’s manufacturing powerhouses—advanced last month alongside most others in the region, according to IHS Markit figures Monday. Taiwan, at 50.6—its best reading since January—was a rare economy that rose above 50, the dividing line between contraction and expansion.

Vietnam and Malaysia retreated from big jumps in June, easing to 47.6 and 50, respectively, in July. China’s Caixin manufacturing PMI, an index more focused on smaller export-oriented firms, increased to 52.8 from 51.2 the prior month, its highest level since January 2011.

China Factory Activity Highest Since 2011, Private Gauge Shows

A separate report Friday showed China’s official manufacturing purchasing managers’ index rose in July to 51.1 from 50.9 a month earlier, according to the National Bureau of Statistics.

India’s manufacturing sector activity contracted for the fourth straight month, as output shrank and demand remained subdued. The IHS index fell to 46.0 in July, from 47.2 a month before.

The global recovery from the pandemic is off to a rocky start in the second half of 2020. Virus cases are approaching 18 million and a million new infections are being recorded about every four days, prompting more lockdowns.

Taiwan’s healthier manufacturing readings included a stabilization of production levels and return to growth of total new orders, according to a statement from IHS Markit. Companies that registered higher new business often mentioned a return to more normal market conditions as the pandemic situation improved. At the same time, new business from abroad fell at a much slower rate, declining modestly overall.

In South Korea, a bellwether for global trade, exports contracted at a slower pace in July, indicating a third month of improvement. Shipments dropped 7% from a year earlier, after a 10.9% decline in June.

Improvement in Asia’s trade engines probably will continue to be hampered by worsening outbreaks abroad.

“The rising infection rates in key export destinations do not bode well for recovery of trade-dependent Asia economies, even with better containment within Asia,” Goldman Sachs analysts wrote in a report Sunday.