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Asia Economy Last Updated: Feb 3, 2014 - 7:34 AM

Manufacturing growth weak in India, South Korea and Indonesia, in January
By Finfacts Team
Feb 3, 2014 - 7:31 AM

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Manufacturing expanded in India in January but growth was weak as were expansions in South Korea and Indonesia, according to data released today.

Indian manufacturers signalled a further improvement in operating conditions during January. The headline HSBC India Purchasing Managers’ Index (PMI) posted 51.4, up from 50.7 in December. The latest reading was the highest since March 2013, but pointed to a marginal pace of expansion that was well below the series average (55.1).

January saw new orders expand at the quickest rate in ten months, with survey participants reporting stronger demand from both domestic and overseas clients. Concurrently, new business from abroad grew at a solid pace that was the fastest since June last year. Subsequently, Indian manufacturers raised their production levels for the third successive month. The rate of output growth was solid and the strongest since February 2013.

Sector data indicated that consumer goods continued to outperform the remaining two monitored categories, while operating conditions deteriorated at capital goods producers. Growth rates for output and new orders in the consumer goods sub-category surpassed those seen at intermediate goods companies.

The HSBC South Korea PMI  posted a reading of 50.9 in January, a fractional improvement on the 50.8 seen in December. January marked the fourth consecutive month in which the PMI posted above the 50.0 no-change mark, separating expansion from contraction, signalling a further improvement in operating conditions at South Korean manufacturers. In addition, this was the sixth month in which the PMI had steadily risen from July’s ten-month low.

Output at South Korean manufacturers grew at a modest rate in January. Whilst the pace of production growth eased marginally from December’s seven-month high, the modest increase was nevertheless an improvement on the weak growth seen in October and November. A number of panellists attributed the latest increase in output to an improvement in domestic economic conditions.

New orders rose for a fourth consecutive month in January. Although the pace of expansion remained modest, it was nevertheless the sharpest in nine months.

New export orders also rose for the fourth month running, and at a sharper pace than seen in December. Some respondents attributed the latest increase to higher levels of new orders from Europe, North America and Japan.

The Indonesian manufacturing sector remained in expansion territory at the start of 2014. Although output levels fell, incoming new business grew at the joint-fastest pace in the history of the series and new export orders increased for the first time since May 2013.

Adjusted for seasonal influences, the HSBC Indonesia PMI registered 51.0 in January, up from December’s 50.9 and above the series average. The latest reading pointed to a slight improvement of manufacturing operating conditions across Indonesia. Boosting the PMI was a solid rise in incoming new work.

New orders placed at Indonesian manufacturers increased for the fourth successive month in January, with companies commenting on stronger demand. The pace at which order book volumes expanded was solid and the joint-fastest in the series history (on par with November 2012). New business from abroad also rose, amid reports of new contract wins from clients in Asia, Europe and North America. Although marginal, the latest increase in export orders ended a seven-month sequence of contraction.

Notwithstanding the solid growth of new orders, output fell in January. That said, the rate of decline was only slight. Among other factors, panellists indicated that lower production levels reflected raw material shortages. Indeed supplier delivery times lengthened further in January. Moreover, vendor performance deteriorated to the greatest extent since last August. Firms largely linked longer lead times to recent heavy rain and floods.

January data indicated that both input costs and output prices rose at rates above their respective series averages. Purchase cost inflation hit a three-month high, with survey participants reporting unfavourable exchange rates. Firms correspondingly raised their tariffs at the strongest rate since October 2013.

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