Tech demand drives Asia’s factory revival

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    An employee working on a production line manufacturing steel structures at a factory in Huzhou, Zhejiang province, China. (Reuters Photo)

    TOKYO- Solid demand for technology goods drove extended growth in Asia’s factories in February, but a slowdown in China underscored the challenges facing the region as it seeks a sustainable recovery from the shattering COVID-19 pandemic blow.

    The vaccine rollouts globally and pick-up in demand provided optimism for a vast number of businesses that had grappled for months with a cash-flow crunch and falling profits.

    In Japan, manufacturing activity expanded at the fastest pace in over two years while South Korea’s exports rose for a fourth straight month in February, suggesting the region’s export-reliant economies were benefiting from robust global trade.

    On the flip side, China’s factory activity grew at the slowest pace in nine months in February, hit by a domestic flare-up of COVID-19 and soft demand from countries under renewed lock-down measures.

    “The big picture, supported by the latest figures, is that China’s growth remains fairly robust, but it is slowing from previously very rapid rates,” Mark Williams, chief Asia economist at Capital Economics, wrote in a note to clients.

    ING economists said that while domestic demand in China should be solid, external demand is likely to continue to be volatile.

    China’s was the first major economy to lead the recovery from the COVID-19 shock, so any signs of prolonged cooling in Asia’s engine of growth will likely be a cause for concern.

    With the global rebound still in early days, however, analysts say the outlook was brightening as companies increased output to restock inventory on hopes vaccine rollouts will normalize economic activity.

    “The recovery in durable-goods demand is continuing, which is creating a positive cycle for manufacturers in Asia,” said Shigeto Nagai, head of Japan economics as Oxford Economics.

    “As vaccine rollouts ease uncertainties over the outlook, capital expenditure will gradually pick up.

    That will benefit Japan, which is strong in exports of capital goods,” he said.

    China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 50.9 in February, the lowest level since last May but still above the 50-mark that separates growth from contraction.