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Global economy: Asian factories are taking Omicron risks calmly for the time being

An employee inspects a circuit board on the controller production line at a Gree factory following the coronavirus disease (COVID-19) outbreak in Wuhan, Hubei province, China on August 16, 2021. China Daily about REUTERS

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  • China’s December private PMI growing fastest in 6 months
  • Factory activity in J -an, South Korea continues to increase
  • Most of the rest of Asia’s economies have seen solid expansion in activity
  • Delivery bottlenecks and rising costs continue to cloud the outlook

TOKYO, Jan. 4 (Reuters) – Factory activity in Asia spiked in December as companies accepted rising global cases of the new variant of Omicron coronavirus, although ongoing supply bottlenecks and rising input costs clouded prospects for some economies.

The rising rate of global infections has caused a stir among policymakers as outbreaks in China force some companies to shut down and threaten to disrupt manufacturing at memory chip giants like Samsung Electronics (005930.KS). Continue reading

However, according to polls released on Monday and Tuesday, Omicron’s direct hit on the issue seemed muted for the time being.

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China’s factory activity grew the fastest in six months in December, the Caixin / Markit Manufacturing Purchasing Managers’ Index (PMI) showed earlier in the day. Continue reading

The results of the private survey, which is more focused on small businesses in coastal areas, are in line with those of the official Chinese PMI, which indicated an increase in factory activity. Continue reading

Other parts of Asia also performed well as factory operations expanded in countries such as Vietnam, Malaysia and the Philippines.

“Manufacturing PMIs and recent trade data show that Asia’s export-oriented industry has gained momentum at the turn of the year,” said Alex Holmes, emerging Asian economist at C -ital Economics.

“While the Omicron variant poses a significant threat to its outlook, it is unlikely to disrupt the industry anywhere near as much as Delta did in the third quarter,” he said.

In J -an, the third largest economy in the world, manufacturing activity rose for the 11th consecutive month in December. And leading exporter South Korea saw its main factories expand at the fastest rate in three months, polls showed.

“We anticipate that Asia’s export and investment recovery will be sustained by a sustained global recovery and that Asia’s manufacturing PMIs will remain moderately strong over the coming months,” Morgan Stanley analysts wrote in a research release.

However, some economists warned that supply bottlenecks and rising input costs remain risks, especially for export-dependent countries like South Korea.

“Given South Korea’s preeminent position in the automotive and electronics industries, significant improvements in global supply chains are needed before we see any significant acceleration in manufacturing growth,” said Joe Hayes, senior economist at IHS Markit.

J -an’s Purchasing Managers’ Index (PMI) was at 54.3 in December and stayed above the 50 mark suggesting expansion of activity but lower than November 54.5 as new orders growth slowed. Continue reading

South Korea’s PMI rose to 51.9 from 50.9 in November, marking the 15th consecutive month of expansion as rising domestic demand offset sluggish foreign sales. Continue reading

India’s manufacturing activity continued to expand in December, albeit at a slower pace than November, as heightened price pressures continued to give cause for concern. Continue reading

“The Omicron variant carries short-term growth risks as it delays the recovery in consumption, but higher vaccination rates in Asia could help limit the growth damage compared to the delta wave,” analysts at Morgan Stanley said.

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Reporting by Leika Kihara Editing by Shri Navratnam

Our Standards: The Thomson Reuters Trust Principles.

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