TOKYO: Asia’s factory activity contracted in January as the push from China’s reopening due to covid had not yet offset headwinds from slowing growth in the United States and Europe, surveys show, underscores the fragility of the region’s economic recovery.
A private sector survey showed China’s factory activity contracted more slowly in January after Beijing lifted strict Covid restrictions late last year.
Easing pressures on input prices also offered initial positive signs for Asia, with the pace of output contraction slowing in Japan and South Korea, the survey showed.
But there is uncertainty about whether Asia will be able to withstand the blow from slowing global demand and stubbornly high inflation, some analysts say.
“The worst of Asia’s recession is over, but the outlook is clouded by weakness in major export destinations such as the United States and Europe,” said Toru Nishihama, chief economist at the Dai-ichi Life Research Institute in Tokyo.
“With the recovery from Covid-19 underway, the Asian economies need a new growth engine. There isn’t one so far.
China’s Caixin S&P Global Manufacturing Purchasing Managers’ Index (PMI) rose to 49.2 in January from 49 in the previous month, holding below the 50 mark that separates growth from contraction for the sixth straight month.
The data was checked against a better-than-expected official PMI survey issued on Tuesday. But while the official PMI largely focuses on large and state-owned Chinese companies, the Caixin survey focuses on small companies and coastal regions.
Japan’s au Jibun bank PMI stood at 48.9 in January, unchanged from the previous month, as manufacturers felt the pain of weak global demand.
But supplier delays were less frequent than at any time since February 2021, while input and output price inflation was the slowest in 16 months, Japan’s PMI survey showed.
South Korea’s factory activity contracted for the seventh straight month in January. The reading was 48.5, up from December’s 48.2 but below the 50-point threshold.
While new orders in South Korea fell for the seventh straight month in January, the rate of decline was slightly slower than the previous month, the survey showed.
“The immediate outlook for South Korea’s manufacturing sector looks challenging,” said Usamah Bhatti, an economist at S&P Global Market Intelligence.
“That said, companies remained confident that global economic conditions would improve and stimulate demand.”
Factory activity expanded in January in Indonesia and the Philippines but contracted in Malaysia and Taiwan, PMI surveys showed.
The International Monetary Fund raised its global growth outlook for 2023 slightly on Tuesday, citing “surprisingly resilient” demand in the United States and Europe and the reopening of China’s economy after Beijing abandoned its pandemic controls.
But the IMF said global growth would still slow to 2.9% in 2023 from 3.4% in 2022, and warned that the world could easily slide into recession. —Reuters
