Factories bounce back from COVID-19 hit, tighter controls over cloud outlook

LONDON / TOKYO (Reuters) – Manufacturers across Europe ended 2020 on a high level, while activity at Asian factories rose moderately on strong demand from the regional Chinese giant, surveys show, but the prospect tougher coronavirus brakes have clouded the outlook for recovery.

Despite hopes that the vaccination programs being rolled out will eventually quell the virus, a surge in infections is forcing many countries to reimpose strict controls on economic activity, which can hurt major exporters such as China. and Germany.

“Global manufacturing was still on a roll until mid-December, which is a very good basis for an economic rebound once the current wave of the pandemic subsides,” Holger Schmieding told Berenberg.

“We could have a slight setback in January as further lockdowns hit manufacturing, but with China remaining fairly strong and the United States not showing significant signs of slowing consumption, the outlook for manufacturing is still good.

Eurozone manufacturing activity has grown at its fastest pace since mid-2018 last month, suggesting that the bloc’s economy has been less severely hit by the pandemic than earlier in the year.

IHS Markit’s final Eurozone Manufacturing Purchasing Managers (PMI) Index rose to 55.2 in December from 53.8 in November, although this figure is lower than estimate initial 55.5 “flash”.

Anything above 50 indicates growth, and December was the highest reading since May 2018. An index measuring output, which fuels a composite PMI expected on Wednesday and considered a good guide to economic health, fell from 55 , 3 to 56.3.

Germany has been the driving force of the bloc again and unlike the dominant service sector – which has been particularly hard hit by lockdown measures to tackle the coronavirus – factories in the region have remained mostly open.

The UK PMI rebounded to a three-year high of 57.5, but that surge was likely largely due to factories rushing to complete orders before the end of the UK’s on-going transition period. leave the European Union. [GB/PMIM]

On December 24, Prime Minister Boris Johnson reached an eleventh hour deal with the EU, avoiding tariffs on trade in goods with the EU. However, trade between the two economic zones will still face significant additional red tape.

Global stock markets hit record highs on Monday, the first trading day of the new year, as investors hoped the vaccine rollout would ultimately lift a global economy decimated by the COVID-19 pandemic. [MKTS/GLOB]

“A potentially rapid rebound in services and the continued strength of manufacturing means that spring is coming, when we hope the pandemic subsides we are heading for a strong rebound in GDP,” said Berenberg’s Schmieding.

ASIAN STRAIN

Manufacturing activity has grown in Japan, South Korea and Taiwan, according to PMI surveys, the latest indication that manufacturers in Asia continue to rebound from damage from the COVID-19 pandemic last year.

But a slowdown in the growth of industrial activity in China has highlighted the challenges. China’s Caixin / Markit PMI fell in December to 53.0 – its lowest level in three months – but remained well above the 50 level.

“External demand has likely been affected by the continued global spread of COVID-19 and the reimplementation of lockdowns,” Chinese HSBC economist Erin Xin said in a research note.

The reading, below 54.9 in November, fell roughly in line with the official measure of plant activity which showed moderate to high activity.

Elsewhere, production stabilized in Japan for the first time in two years, while India’s industrial sector ended roughly 2020 on a stronger note as manufacturers ramped up production to meet growing demand.