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The Asia-Pacific manufacturing sector has shown a considerable
upturn since the fourth quarter of 2020, with latest IHS Markit
manufacturing PMI survey data showing strong momentum in many APAC
economies in early 2021. With buoyant APAC GDP growth of 5.8%
forecast for 2021, this is expected to underpin rapid expansion in
manufacturing output this year.
APAC manufacturing rebounds
The manufacturing sector in many Asia-Pacific (APAC) economies
has shown a significant rebound since September 2020, as lockdown
measures have been significantly eased in many nations as domestic
pandemics have been stabilized. While some Asian nations such as
Japan and Malaysia have had new waves of Covid-19 cases in recent
months, the overall momentum of manufacturing output across the
region has shown a substantial recovery.
The IHS Markit APAC Manufacturing PMI for January 2021 shows
that regional manufacturing production has strengthened in recent
months, with the January data signaling further positive expansion
in manufacturing output in coming months.
The outlook for manufacturing production in 2021 is underpinned
by the rapid expansion forecast for world economic growth, at a
pace of around 5% y/y. In the APAC region, GDP growth is expected
to be even faster, at around 5.8% y/y in 2021. A key driver for the
rapid pace of expansion in the APAC region is expected to be a
buoyant pace of economic growth in China, at around 7.6% y/y in
2021. In India, a substantial economic recovery is also expected in
fiscal 2021-22, with GDP growth of 8.9% y/y.
Expansion in manufacturing industries led the IHS Markit Asia
Industry PMI rankings for January 2021, occupying the top five
places. The automobiles & auto parts sector topped the Asia PMI
sector output rankings in January. It registered the fastest rate
of growth of all categories for the third time in the past six
months. Household & personal use products and machinery &
equipment registered faster growth in second and third places
respectively, followed by metals & mining and chemicals.
Construction materials also showed moderate expansion, as
construction activity improved in many countries as lockdowns have
been rolled back.
The recovery in APAC manufacturing has been led by China, which
experienced a return to positive growth in industrial production
already by the second quarter of 2020, with industrial output
growth strengthening during the second half of 2020.
In Japan, the headline Flash Au Jibun Japan Manufacturing PMI
rose from 49.8 in January to 50.6 in February, marking a return to
expansion for Japan's manufacturing sector. Both output and new
orders expanded at the fastest rate since December 2018, while new
export orders also recorded positive growth.
In South Korea, the positive momentum of manufacturing sector
output continued to be reflected in early 2021, with the seasonally
adjusted South Korea Manufacturing Purchasing Managers' Index (PMI)
rising to 53.2 in January from 52.9 in December. This marked the
strongest improvement in the health of the manufacturing sector
since February 2011.
In the ASEAN region, manufacturing output has also shown a
substantial rebound in recent months, helped by an upturn in
exports as well as improving domestic demand.
The Indian manufacturing industry has also shown considerable
recovery since September 2020, as domestic consumer spending has
strengthened, with the latest IHS Markit India Manufacturing PMI
for January showing a buoyant start to 2021, rising from 56.4 in
December to 57.7 in January. In response to faster expansions in
total sales and new export orders, companies have increased output
at a more rapid pace.
APAC electronics sector shows strong
expansion
The IHS Markit Global Electronics Purchasing Managers' Index has
signaled a strong rebound since mid-2020 as global lockdowns were
eased and consumer spending rebounded in many major economies. The
IHS Markit Global Electronics PMI new orders index rose from a
calendar year-to-date low of 35.0 in May 2020 to a level of 53.4 by
January 2021, reflecting a significant recovery in new orders. This
rebound in global electronics demand has been reflected in the
recent industrial production and exports data for many East Asian
economies with large electronics manufacturing output, including
South Korea, China, Vietnam, Singapore and Malaysia.
APAC auto sector rebounds
Following a severe slump in the Asian auto sector during the
first half of 2020 due to pandemic lockdowns in major economies,
including China and India, the Asian auto sector has rebounded
significantly during the second half of 2020 and early 2021. This
is reflected in the IHS Markit Automobiles and Auto Parts Output
PMI, which has shown strong expansion in recent months.
The auto market in mainland China experienced another month of
buoyant growth in new vehicle sales in January, reflecting robust
demand for passenger vehicles and for commercial vehicles.
According to data released by the China Association of Automobile
Manufacturers (CAAM), new vehicle sales on a wholesale basis
increased by 29.5% year on year (y/y) to 2.503 million units in
mainland China in January, while production rose by 34.6% y/y to
2.388 million units. (See IHS Markit Automotive, "Chinese new
vehicle sales grow 30% y/y, NEV volumes set new record in January -
CAAM", 10 Feb 2021, IHS Markit AutoIntelligence.)
In India, according to data released by the Society of Indian
Automobile Manufacturers (SIAM), automakers dispatched 276,554
passenger vehicles to dealers during January, including passenger
cars, utility vehicles (UVs), and vans, a surge of over 11% year on
year (y/y). (See IHS Markit Automotive, "New passenger vehicle
dispatches in India grow around 11% y/y during January - SIAM
data", 12 Feb 2021, IHS Markit AutoIntelligence.)
Near-term outlook
With rapid world growth forecast for 2021, the APAC
manufacturing sector is expected to show robust expansion. The
combined impact of a recovery in domestic demand across many major
APAC economies combined with strong export growth to major global
markets outside of APAC, notably the US and EU, will drive the
expansion in manufacturing production. With rapid GDP growth
forecast for China, India and ASEAN, many sectors of Asian
manufacturing are expected to lead the near-term economic
recovery.
The Asian electronics sector, which accounts for a significant
share of manufacturing production and exports for many East Asian
economies, is already showing buoyant growth as the pandemic
continues to drive rapid growth in demand for products such as
laptops, while global 5G rollout is also boosting demand for new
smartphones.
The Asian auto sector, which suffered a severe slump in
production in the first half of 2020 due to widespread global
lockdowns, has also shown a substantial upturn in recent months as
consumer demand recovers.
Due to the pandemic, the pharmaceuticals and medical equipment
sector has also performed strongly in many Asian economies,
including China, India and Singapore. Other sectors that are also
showing expansion include household and personal use products,
machinery and equipment as well as chemicals.
Rajiv Biswas, Asia Pacific Chief Economist, IHS
Markit
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
