BUSINESS FACTORS

Asia Manufacturing Picture Improves Despite Strains

China’s manufacturing sector showed signs of improving health in January, but manufacturing and trade data elsewhere in Asia pointed to continuing weakness as slowing demand from Western economies takes its toll.

China’s official Purchasing Managers’ Index improved to 50.5 from 50.3 in December, signaling that manufacturing activity is picking up again. That was significantly more upbeat than economists’ forecast of 49.6. A reading below 50 indicates a contraction in manufacturing activity.

A separate gauge of Chinese manufacturing from HSBC showed contraction but improved slightly, to 48.8 in January from December’s 48.7. Economists say the HSBC measure has been weaker recently because it is weighted more heavily toward smaller-size companies, which have been disproportionately affected by weak exports and tight financing conditions.

HSBC readings for Taiwan and South Korea showed manufacturing continuing to contract, though less severely than in December. HSBC’s PMI for Taiwan checked in at 48.9, versus December’s 47.1. For South Korea, the HSBC measure was at 49.2 in January, up from 46.4 in December.

South Korea also announced its first monthly trade deficit in two years, as exports in January fell 6.6% from a year earlier

“China is stabilizing itself, but as of this moment, it is not showing signs of single-handedly lifting the region and the entire world as it did in 2009” following the global financial crisis, said Dong Tao, an economist at Credit Suisse in Hong Kong.

Slackening demand in the West is also having a damping effect on Chinese strength: A subindex that measures export orders fell in January. But overall orders rose, suggesting domestic demand is helping to support production in China.

As growth cools, inflation in some parts of the region is coming down. Indonesia’s consumer price index rose 3.65% in January from a year earlier, slower than December’s 3.795% rise and roughly in line with economists’ forecasts.

In Thailand, CPI eased to a 3.38% increase from December’s 3.53% rise.

Australia’s manufacturing sector grew for the second straight month in January but factory output remains constrained by the uncertain global outlook and strong offshore competition.

A PMI from the Australian Industry Group-PricewaterhouseCoopers rose 1.4 points in January to 51.6.

Indian manufacturing continued to show the strongest growth in the region, with an HSBC PMI there rising to 57.5 in January from December’s 54.2, in strongly expansionary territory.

Source: Excerpted from The Wall Street Journal