Asia, Europe Manufacturing Grows as Omicron Keeps Spreading

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Asia and European factory activity continued its expansion in December, lifted by resilient demand and easing supply-chain bottlenecks as the omicron strain begins to spread in the region.

North Asia's export hubs led the recovery as they enjoyed better-than-expected industrial production and robust demand for their tech products. The IHS Markit manufacturing purchasing managers' index for Taiwan rose to a 55.5 last month from 54.9 in November, while South Korea saw the sharpest jump to 51.9 from 50.9.

Malaysia and the Philippines also posted better readings. Indonesia showed a slight dip to 53.5 from 53.9, but still above the 50 level that separates expansion and contraction. India also eased, to 55.5 from 57.6.

In the euro area, the manufacturing PMI slipped to 58, with Italy showing the strongest growth reading and France the weakest. Many companies across the region continued to feel the impact of shortages at suppliers, with others noting subdued demand pressures, according to the report.

“We're seeing some tentative, but very welcome signs that the supply chain crisis which has plagued production lines all across Europe is beginning to recede,” says Joe Hayes, senior economist at IHS Markit. “Covid-19-driven supply chain disruptions cannot be ruled out, and therefore neither can further spikes in inflation.”

As omicron wreaks havoc in the U.S. and parts of Europe, Asia is bracing for the possibility the new variant could darken its manufacturing outlook and set back the economic recovery. Lockdowns during the last wave in mid-2021 upended the region's factories, from their staffing to their sourcing of raw materials.

China on Friday reported that factory activity continued its recovery in December as commodities prices fell significantly and cost pressures on companies eased to some extent. The official gauge of manufacturing rose to 50.3 last month from 50.1 in November, while non-manufacturing rose to 52.7 from 52.3, both above consensus forecast.