Asian factories get rid of supply problems but Omicron poses new risks

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An employee measures a newly manufactured ball mill at a factory in Nantong, Jiangsu province, China, June 28, 2019. REUTERS / Stringer

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  • China’s private PMI falls back into contraction
  • Japan, South Korea: expansion of factory activity in November
  • Supply bottlenecks are easing but continue to weigh on activity
  • New Omicron variant, China’s slowdown clouds Asia’s outlook

TOKYO, Dec. 1 (Reuters) – Activity at Asian factories increased in November as crippling supply bottlenecks eased, but rising input costs and new weakness in China dampened the region’s prospects for a rapid and lasting recovery from pandemic paralysis.

The recently detected variant of the Omicron coronavirus has become of new concern to policymakers in the region, who are already grappling with the challenge of pulling their economies out of the doldrums while trying to keep inflation under control amid rising costs. commodities and parts shortages.

Chinese factory activity fell back into contraction in November, the Caixin / Markit Private Purchasing Managers Index (PMI) showed on Wednesday, as weak demand and high prices hurt manufacturers.

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The results of the private survey, which focuses more on small businesses in coastal regions, contrast with those of China’s official PMI on Tuesday which showed manufacturing activity increased unexpectedly in November, although ‘at a very modest pace.

“The easing of constraints on the supply side, in particular the alleviation of the electricity crisis, has accelerated the pace of the resumption of production,” said Wang Zhe, senior economist at Caixin Insight Group, in a press release accompanying the publication of the data.

“But demand was relatively weak, suppressed by the COVID-19 epidemic and rising commodity prices.”

Beyond China, however, factory activity appeared to be improving with PMIs showing expansion in countries such as Japan, South Korea, Vietnam and the Philippines.

Japan’s PMI index rose to 54.5 in November from 53.2 in October, the fastest pace of expansion in nearly four years.

South Korea’s PMI climbed to 50.9 from 50.2 in October, remaining above the 50-point threshold which indicates an expansion in activity for the 14th consecutive month.

But production fell in South Korea for a second consecutive month as Asia’s fourth-largest economy struggles to regain full momentum amid persistent supply chain disruptions.

Overall, with new export orders flowing to countries previously hampered by the Delta outbreaks and downstream supply chain disruptions still ongoing, there are many opportunities for a continued rebound in regional industry, ”said Alex Holmes, Economist for Emerging Asia at Capital Economics.

Vietnam’s PMI rose to 52.2 in November from 52.1 in October, while that of the Philippines fell from 51.0 to 51.7.

Taiwan’s manufacturing activity continued to grow in November, but at a slower pace, with the index hitting 54.9 from 55.2 in October. The situation was similar for Indonesia, which saw the PMI fall to 53.9 from 57.2 in October.

The November surveys likely did not reflect the spread of the Omicron variant which could add additional pressure on supply chains disrupted by the pandemic, with many countries imposing new border controls to shut down.

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Reporting by Leika Kihara; Editing by Sam Holmes

Our Standards: Thomson Reuters Trust Principles.

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