Factory activity mixed in key Asian economies

BEIJING/SEOUL/TOKYO • Key Asian economies saw a mixed month of factory activity in April and last month, reflecting the uneven pace of Covid-19 recovery globally.

China's factory activity slowed slightly last month as the high costs of raw materials and supply bottlenecks continued to weigh on industrial production, particularly for small and export-oriented firms.

South Korea's factory output in April unexpectedly declined from March but logged the fastest expansion in almost three years on a yearly basis, while Japan's industrial output rose in April, helped by the production of general purpose and electrical machinery as the appetite for such goods rises in the United States and China.

China's official manufacturing Purchasing Managers' Index (PMI) inched lower to 51 last month from 51.1 in April, data from the National Bureau of Statistics showed yesterday, but remained above the 50-point mark that separates growth from contraction. Analysts had expected a PMI reading of 51.1.

While the Chinese economy has largely shaken off the gloom from the pandemic, posting a record 18.3 per cent growth in the first quarter of this year, analysts expect the brisk expansion to moderate later this year.

Officials warn that the foundations for economic recovery are not yet secure amid problems like higher raw material costs and the Covid-19 situation overseas.

In April, both output and profits at China's industrial firms grew at a slower pace.

Prices for commodities such as coal, steel, iron ore and copper have surged this year, fuelled by post-lockdown recoveries in demand and easing liquidity globally.

China's policymakers have repeatedly expressed concern about rising commodity prices in recent weeks and called for stricter management of supply and demand and to crack down on "malicious speculation". A sub-index for raw material costs in the official PMI stood at 72.8 last month, up from April's 66.9.

In the service sector, activity expanded for the 15th straight month, and at a faster pace.

Japan's factory output grew 2.5 per cent in April from the previous month, as higher production of general purpose and electrical machinery offset a contraction in cars and transportation equipment output.

The rise in output was better than the previous month's 1.7 per cent gain, but much weaker than a 4.1 per cent advance forecast in a Reuters poll of economists as Japan's car production fell largely due to supply issues with semiconductor chips.

Manufacturers surveyed by Japan's Ministry of Economy, Trade and Industry expected output to shed 1.7 per cent last month, followed by a 5 per cent rebound this month.

72.8

Sub-index for raw material costs in China's official Purchasing Managers' Index last month, up from 66.9 in April

The world's third-largest economy is expected to grow in the current quarter at a much slower pace than previously thought after the government extended coronavirus emergency measures in Tokyo and other major areas.

Separate data yesterday showed Japan's retail sales, a key gauge of consumer spending, surged in April, due largely to favourable statistical base effects from a year earlier, when the country was under even stricter curbs.

In South Korea, industrial production fell by a seasonally adjusted 1.6 per cent in April, the biggest contraction since May last year and missing a gain of 1.5 per cent forecast in a Reuters survey.

However, on a yearly basis, factory output surged 12.4 per cent, the fastest growth since October 2018, as production was sluggish in the second quarter of last year.

REUTERS