Asia’s Factory Activity Declines Amid China Reopening

Data showed that factory activity in Asia declined in January despite China’s COVID reopening as it dealt with headwinds from slowing U.S. and European growth, highlighting the fragility of the region’s economic recovery.

A private-sector survey showed that softening input price pressures could be a positive sign for Asia as the pace of contraction in output is slowing in Japan and South Korea.

However, analysts say there is uncertainty on whether Asia can avoid getting hit by slowing global demand and stubbornly high inflation.

“The worse of Asia’s downturn is behind, but the outlook is clouded by weaknesses in major export destinations like the United States and Europe,” said Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo.

“With the recovery from COVID-19 underway, Asian economies need a new growth engine. There isn’t one so far,” Nishihama added.

China’s Caixin/S&P Global manufacturing purchasing managers’ index (PMI) increased to 49.2% in January from 49% in the past month, still staying below the 50 mark that would separate growth from contraction for a sixth straight month.

The official PMI survey mainly focuses on big and state-owned Chinese businesses, while the Caixin survey centers on small firms and coastal regions.

Meanwhile, Japan’s au Jibun Bank PMI was 48.9% in January as manufacturers dealt with the weak global demand. The Japan PMI survey showed fewer supplier delays, while inflation was slowest in 16 months.

South Korea’s factory activity raised to 48.5% from 48.2% in December. The rate of decline for new orders in South Korea was slightly slower.

“The immediate outlook for the South Korean manufacturing sector appears challenging,” economist at S&P Global Market Intelligence Usamah Bhatti said.

“That said, firms remained confident that global economic conditions would improve and stimulate demand,” Bhatti said.

The PMI surveys showed factory activity in Indonesia and the Philippines expanded in January while it shrank in Malaysia and Taiwan.

The International Monetary Fund slightly raised its 2023 global growth outlook on the “surprisingly resilient” demand in the United States and Europe and with the reopening of China’s economy.

However, the IMF said global growth would still slow to 2.9% in 2023 and warned that the world could easily tip into recession.

Source: Inquirer.net