Japan/S. Korea Factory Sentiment Further Shrinks in June while China Beat Expectations

Japan and South Korea’s factory activity further shrank in June as coronavirus weighted on global demand, along with an uncertainty over economic recovery, while China’s manufacturing activity beat expectations after the government lifted lockdowns.

 

The au Jibun Bank Japan Manufacturing Index (PMI) edged up slightly to 40.1 in June, from 38.4 in May and a preliminary 37.8 released last week, but the headline index stayed below the 50.0 threshold that separates contraction from expansion for a 14th month – the longest such stretch since a 16-month run through June 2009.

 

“The latest PMI survey, which showed sharp reductions in new orders, output and purchasing activity. Businesses that restarted their production lines reportedly operated well below capacity as economic conditions both domestically and globally remained fragile amid the ongoing coronavirus disease 2019 (Covid-19) pandemic.” said in a private survey conducted by IHS Markit reported on July 1.

 

The survey also pointed out a positive sign on Japanese economy as business confidence moved into positive territory for the first time since February on expectations of a gradual economic recovery, IHS Markit said.

 

While South Korea’s manufacturing sector posted a continuous decline in production during June as demand remained weak. IHS Markit South Korea Manufacturing Index (PMI) increased to 43.4 in June, from 41.3 in May, but the figure remained below the 50.0 mark threshold that separates contraction from expansion for a 6th straight month. 

 

“The slight increase in the PMI reflected slower rates of contraction in the index’s major components, new orders and output.” said IHS Markit. “According to anecdotal evidence, demand conditions remained extremely weak as a consequence of the ongoing global Covid-19 pandemic.”

 

IHS Markit has a negative view on South Korea manufacturer as output over the next 12 months also remained pessimistic.

 

In the meantime, the recovery in China’s manufacturing sector in June continues to spur an extended rise in production and a renewed increase in total new business.

 

“The upturn was supported by the recent easing of measures related to the coronavirus disease 2019 (Covid-19) outbreak.” reported the Caixin/Markit.

 

China’s Manufacturing Purchasing Managers’ Index (PMI) increased from 50.7 in May to 51.2 in June, to signal a second successive monthly improvement in the health of the sector. 

 

However, the exports sector continued to fall amid reports of weak external demand, but business confidence rose to a four-month high, while firms expanded their purchasing activity at a quicker rate, Caixin said.