(Bloomberg) -- Manufacturing activity across most of Asia continued to expand in July, supported by gains in new orders even as others saw operating conditions deteriorate.
Factories in much of North Asia, which have been witnessing a better-than-expected exports growth, stayed in expansion territory. The manufacturing purchasing managers’ index for Taiwan came in at 52.9 last month from 53.2 in June, while South Korea saw its index at 51.4 from 52, according to data published by S&P Global on Thursday. Japan slipped further to 49.1 from 50 a month prior, compiler au Jibun Bank said.
“July PMI data signalled that the South Korean manufacturing sector saw a sustained improvement in operating conditions,” said Usamah Bhatti, economist at S&P Global Market Intelligence. “Both output and new order volumes rose, but at softer rates.”
The Korean won rallied to its strongest since June 13, but gave up some of those gains following the release of the data.
In Asia’s south, Vietnam, Thailand and the Philippines remained above the 50 level that separates expansion from contraction, while Indonesia entered contraction territory. Activity in Malaysia shrank further to 49.7 from 49.9 in June.
The picture of an uneven recovery compares with continuing weakness in China, where the official manufacturing purchasing managers’ index Wednesday showed factory activity shrank for a third straight month. While the gauge of manufacturing hit 49.4 last month from 49.5 in June, the measure of non-manufacturing activity in construction and services fell to 50.2, below a median forecast of 50.3.
Chinese officials attributed the decrease to July being the off-season for production, as well as insufficient market demand and extreme weather conditions in some localities.
The wavering fortunes in Asia will probably continue, given a new US trade rule next month seeking to stop exports of semiconductor manufacturing equipment from some foreign countries to Chinese chipmakers. Shipments from America’s allies, including Japan and South Korea, will be excluded from the rule though, Reuters reported.
A flare-up in geopolitical tensions following the killing of Hamas’ political leader Ismail Haniyeh poses a risk to the outlook. Oil jumped above $80 a barrel as traders assess the risk of an escalation in the conflict and whether it might lead to more attacks on ships traveling through the Red Sea, or affect production and exports.
--With assistance from Cynthia Li and Catherine Bosley.
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