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Asia’s factory activity expands on strong global demand

global economy

But cost pressures weighed on manufacturers in countries such as Japan, where the weak yen is raising the price firms pay for fuel and raw material imports

Asia’s factory activity expanded in June on strong momentum in the global economy and brightening prospects for semiconductor output, surveys showed on Monday, offering policymakers some hope the region can weather the hit from soft Chinese demand.

But cost pressures weighed on manufacturers in countries such as Japan, where the weak yen is raising the price firms pay for fuel and raw material imports.

China’s Caixin/S&P Global manufacturing PMI advanced to 51.8 in June from 51.7 in May, a private survey showed on Monday, staying above the break-even line of 50.0 that separates growth from contraction. It marked the fastest clip in over three years and surpassed market forecasts of 51.2.

The private-sector reading followed official purchasing managers’ index data released on Sunday that showed China’s manufacturing activity dropped for a second month in June and services activity slipped to a five-month low.

The surveys show how Chinese companies are raising production despite weak domestic demand, which Beijing has failed to reverse with a rescue package for an ailing property sector.

In a sign the Asian region was benefiting from strong global demand, South Korea’s factory activity growth rose in June to the fastest in 26 months on surging new orders, a private survey showed on Monday.

Factory activity also expanded in June at a faster pace than in May in Vietnam and Taiwan, surveys showed.

Another strong month of data provides further evidence that global industrial activity and trade are increasing, said Joe Hayes, principal economist at S&P Global Market Intelligence, on South Korea’s factory activity.

Viewed as a bellwether for exports due to its integration in supply chains for key intermediate goods such as batteries and semiconductors, South Korean manufacturing output and orders often provide leading signals for trends more widely, he added.

Japan’s factory activity expanded in June, but at a slower pace than in May, as firms struggled with growing costs due to the weak yen.

The final au Jibun Bank Japan manufacturing PMI was at 50.0 on the break-even line that separates growth from contraction, after a brief improvement to 50.4 in May, according to a survey.

An index gauging Japanese firms’ future output expectations rose to a six-month high due to a better medium-term outlook for the car and chip sectors, according to the PMI survey.

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