Asia’s factory activity contracts despite China’s COVID reopening

  • China factory activity slows in January – Caixin PMI survey
  • Manufacturing activity in Japan, South Korea remains weak
  • Relieving input price pressures is a silver lining
  • Positive recovery in China, but uncertain outlook for Asia

TOKYO (Reuters) – Factory activity in Asia contracted in January. A boost from China’s coronavirus resurgence has yet to offset headwinds from slowing growth in the U.S. and Europe, a survey showed Wednesday, highlighting the vulnerability of the region’s economic recovery.

Factory activity in China contracted more slowly in January after Beijing lifted strict COVID restrictions late last year, a private-sector survey showed.

Easing pressure on input prices also brought the first positive signs to Asia, with Japan and South Korea showing a slowdown in output contraction, the survey said.

But some analysts say there is uncertainty about whether Asia can weather the blows of slowing global demand and stubbornly high inflation.

“Asia’s worst recession is past, but weakness in key export destinations such as the United States and Europe is clouding the outlook,” said Toru Nishihama, chief economist at Dai-ichi Life Research Institute.

“As the recovery from COVID-19 progresses, Asian economies need new growth engines. So far, they have not.”

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China’s Caixin/S&P Global Manufacturing Purchasing Managers Index (PMI) edged up to 49.2 in January from 49.0 the previous month, falling below the 50 mark that separates growth and contraction for the sixth straight month.

The data contrasted with a better-than-expected official PMI survey released on Tuesday. But while the official PMI focuses primarily on China’s large and state-owned enterprises, Caixin’s survey focuses on small businesses and coastal regions.

Japan’s au Jibun Bank PMI remained unchanged at 48.9 in January, as manufacturers felt pain from weak global demand.

However, supplier delays were lower than at any time since February 2021, and input and output price inflation was the lowest in 16 months, a Japanese PMI study showed.

Factory activity in South Korea contracted for the seventh straight month in January. The number is 48.5, up from 48.2 in December, but still below the 50 point threshold.

New orders in South Korea fell for the seventh month in a row in January, although the rate of decline was slightly slower than a month ago.

“The near-term outlook for South Korea’s manufacturing sector looks grim,” said Usama Bhatti, an economist at S&P Global Market Intelligence.

“That said, businesses remain confident that global economic conditions will improve and demand will be stimulated,” he said.

Factory activity increased in Indonesia and the Philippines in January, but contracted in Malaysia and Taiwan, according to a PMI survey.

India’s manufacturing sector started the year weaker, expanding at its slowest pace in three months in January as output and sales growth slowed.

The International Monetary Fund on Tuesday slightly lowered its global growth outlook for 2023 after Beijing abandoned strict pandemic controls, following “surprisingly resilient” demand in the US and Europe and the reopening of the Chinese economy. raised to

But the IMF warned that global economic growth could slow from 3.4% in 2022 to 2.9% in 2023, and the world could easily slip into recession.

Reported by Reika Kihara.Editing by Bradley Perrette

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