Asian manufacturing improves; China up, India shines
Manufacturing in Asia has taken off, latest data show, with Chinese PMIs showing expansion. But some economists warn of weakness ahead
Official PMI data from China, released on the first day of the New Year, was slightly disappointing as it showed the index unchanged in December from November's 50.6, compared with expectations of an increase to 51 in a Reuters poll of analysts.
New orders were flat at 51.2 and export orders fell slightly to 50 in December from November's 50.2.
But a private measure of manufacturing, HSBC's China Manufacturing PMI, showed operating conditions improving at the fastest rate in 19 months, Markit said in a statement when the figures were released on December 31.
The index was 51.5 in December from November's 50.5 and against expectations of 50.9. The flash index, released two weeks before, hit a 14-month high.
The final figure showed that output at plants in China expanded in December for the second month in a row and the expansion, albeit modest, was the fastest in 21 months.
Total new orders rose at the quickest pace since January 2011 while new export orders fell slightly, reversing November's modest increase.
Purchasing activity rose "at a marked rate" in December, the fastest since March 2011, Markit noted.
"Such a momentum is likely to be sustained in the coming months when infrastructure construction runs into full speed and property market conditions stabilize," Hongbin Qu, chief economist for China at HSBC, said in the statement accompanying the release of the data.
Coupled with Beijing's pledge to keep pro-growth policies in place during the year, this should support "a modest growth recovery of around 8.6% in 2013, despite ongoing external headwinds," Qu added.
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South Korea's manufacturing PMI rose to 50.1 in December from November's 48.2 and Taiwan's rose to 50.6 from 47.4.
INDIA'S GROWTH FASTEST
India's PMI, which fell sharply in the middle of last year, is now the highest in Asia, having increased for 3 months in a row and reaching 54.7 in December.
It was the fastest rate of expansion in 6 months. New export orders also increased, and the data signalled an increase in job creation.
"Moreover, final goods inventories depletion continued, which suggests that output growth is likely to hold up in coming months," Leif Eskesen, chief economist for India and ASEAN at HSBC, said in the statement.
But he warned that inflation eased only marginally and survey respondents said there were price pressures from the rising cost of raw materials, strong demand and the depreciated rupee.
"With growth picking up led by firmer demand, inflation pressures are likely to remain firm in coming months, Eskesen said.
PMI numbers worsened in Vietnam and Indonesia. One analyst pointed out that, despite the overall improvement shown by the data in Asia, a real recovery was unlikely.
"The recent improvement in economic conditions in China, the deal to avert a fiscal cliff in the US as well as signs that the euro-zone crisis is stabilising should provide a boost to manufacturers in Asia over the coming months," Gareth Leather, Asia economist at Capital Economics, said.
"Nonetheless, we do not expect to see any sustained recovery in the global economy this year. Given our view that the euro-zone crisis will escalate again, we think Asian manufacturers, especially in the relatively open economies of Taiwan and Korea, are in for another difficult year," he added.