Asia factories signal revival, but exports sluggish

By Kim Coghill, Reuters

SINGAPORE — Manufacturing activity in Asia expanded in December as China’s economy showed signs of revival but export demand was uneven, pointing to further sluggish growth for the region, business surveys suggest. Private and official manufacturing surveys added to evidence that China’s economy picked up late in the year, while activity in India expanded at its strongest pace in six months in December, boosted by strong factory output and a spike in new orders. Similar reports on Wednesday also showed activity increased in South Korea and Taiwan for the first time since May. But while domestic orders showed some improvement, export orders were decidedly mixed, pointing to continued weakness in global demand with Europe mired in recession and fears of tighter fiscal policy clouding recovery prospects in the United States. South Korean exports unexpectedly fell in December, according to data on Tuesday, highlighting that any recovery for export-reliant Asian economies is likely to be patchy and slow.

“Asia is gradually improving, but the region, including China, remains largely exposed to exports and without signs of improvement in the U.S. and Europe it will be hard for activity to take off,” said Frederic Neumann, co-head of Asian economics at HSBC. Later on Wednesday, similar surveys are expected to indicate the eurozone recession likely deepened in the fourth quarter while U.S. ISM manufacturing in December was expected to modestly expand.

In Asia, much hinges on the pace and quality of the recovery in China as a new generation of leaders prepares to take charge. The official China manufacturing purchasing managers’ index (PMI) released on Tuesday held steady in December at 50.6, matching November’s seven-month high, though growth in new orders was unchanged and the pace of output softened marginally. A similar survey by HSBC released a day earlier, which focuses more on smaller and midsized firms, suggested activity was at its strongest since May 2011.