Asia’s factory activity contracts despite China’s COVID reopening
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By Leika Kihara
TOKYO (Reuters) – Asia’s factory activity fell in January as the boost from China’s reopening from COVID has yet to offset headwinds from slowing growth in the US and Europe, surveys showed on Wednesday, highlighting the fragility of the region’s economic recovery underlines.
China’s factory activity shrank at a slower pace in January after Beijing lifted strict COVID curbs late last year, a private sector survey showed.
Easing input price pressures also offered early positive signs for Asia, with the pace of output declines slowing in Japan and South Korea, surveys showed.
But there is uncertainty about whether Asia can weather the impact of slowing global demand and stubbornly high inflation, some analysts say.
“The worst of the downturn in Asia is behind us, but the outlook is clouded by weaknesses in key export destinations like the United States and Europe,” said Toru Nishihama, chief economist at the Dai-ichi Life Research Institute in Tokyo.
“As the recovery from COVID-19 begins, Asian economies need a new growth engine. So far there is none.”
China’s Caixin/S&P Global Manufacturing Purchasing Managers’ Index (PMI) rose to 49.2 in January from 49.0 the previous month, staying below the 50 mark, which separates growth from contraction, for the sixth straight month.
The data was compared to a better-than-expected official PMI survey released on Tuesday. But while the official PMI largely focuses on large and state-owned Chinese companies, the Caixin survey focuses on small businesses and coastal regions.
Japan’s au Jibun Bank PMI came in at 48.9 in January, unchanged from the previous month as manufacturers felt the pain of weak global demand.
But delivery delays have been at an all-time low since February 2021, while input and output price inflation was at its lowest in 16 months, the Japanese PMI survey showed.
South Korea’s factory activity contracted for the seventh straight month in January. The reading was 48.5, up from 48.2 in December but below the 50-point line.
While new orders in South Korea contracted for the seventh straight month in January, the rate of decline was slightly slower than a month earlier, the survey showed.
“The immediate prospects for South Korea’s manufacturing sector appear challenging,” said Usamah Bhatti, economist at S&P Global Market Intelligence.
“Nevertheless, companies remained confident that global economic conditions would improve and boost demand.”
Factory activity picked up in Indonesia and the Philippines in January but contracted in Malaysia and Taiwan, PMI surveys showed.
The International Monetary Fund on Tuesday slightly upgraded its global growth outlook for 2023 on “surprisingly resilient” demand in the United States and Europe and the reopening of the Chinese economy after Beijing eased its tight pandemic controls.
However, the IMF said global growth would slow to 2.9% in 2023 from 3.4% in 2022 and warned that the world could easily slide into recession.
(Reporting by Leika Kihara; Editing by Bradley Perrett)
