Manufacturing activity strong in December

Manufacturing activity strong in December

LONDON TOKYO Global manufacturing activity remained strong in December as factories took rising cases of the new Omicron coronavirus variant in their stride, but persistent supply constraints and rising costs hindered the outlook for some economies.

Rising global infections have inspired policymakers to tread carefully, with outbreaks in China forcing some firms to suspend production and disrupting output for memory chip giants, such as Samsung Electronics.

Omicron's output seems to be modest for now, according to surveys released on Monday and Tuesday.

At the end of 2021, manufacturing activity in the euro zone remained resilient as factories took advantage of some easing of supply chain bottlenecks and stocked up on raw materials at a record pace, a survey showed on Monday.

Manufacturing activity in Britain grew slightly faster than originally thought last month, according to another survey on Tuesday.

Samuel Tombs, Chief UK economist at Pantheon Macroeconomics said that supply chain disruptions will likely worsen this month, given that Britain's customs checks have been bolstered and Omicron will lead to renewed factory closures in Asia.

In China factory activity increased at its fastest pace in six months in December, according to the Caixin Markit Manufacturing Purchasing Managers' Index PMI.

The findings from the private survey, which focuses more on small firms in coastal regions, are tallied with those in China's official PMI that pointed to an increase in factory activity.

In other parts of Asia, manufacturing activity expanded in countries ranging from Vietnam to Malaysia and the Philippines.

The manufacturing PMIs and timely trade data reveal that Asia's export-focused industry gained momentum at the turn of the year, said Alex Holmes, emerging Asia economist at Capital Economics.

He said that the Omicron variant is a key threat to the outlook, but it is unlikely to cause as much disruption to industry as Delta did in Q 3, he said.

In Japan, the world's third-biggest economy, manufacturing activity increased for an 11th consecutive month, while South Korea saw the fastest expansion in three months, according to surveys.

Asia's exports and capex upswing will continue to be sustained by continued global recovery, and Asia's manufacturing PMIs will remain moderately strong over the coming months, Morgan Stanley analysts wrote in a research note.

In December, Japan's PMI stood at 54.3, which is above the 50 mark threshold that indicates expansion in activity but lower than November's 54.5, as new order growth softened.

South Korea's PMI rose to 51.9 from 50.9 in November to mark the 15th consecutive month of expansion, as rising domestic demand offset sluggish overseas sales.

India's manufacturing activity continued to expand in December, though at a slower pace than in November, as elevated price pressures remained a concern.

The Omicron variant poses near-term growth risks by delaying the consumption recovery, but higher vaccination rates in Asia could help limit the damage to growth compared to the Delta wave, Morgan Stanley analysts said.