Asia factory activity contracts despite covid reopening in China

  • Jan Factory Activity Declines in China – Caixin PMI Survey
  • Manufacturing activities in Japan and South Korea are weak
  • Reducing input price pressure is a sign of hope
  • China’s comeback is positive, but Asia’s outlook is uncertain

TOKYO, Feb 1 (Reuters) – Asian factory activity eased in January as a boost from China’s covid reopening failed to stem a slowdown in U.S. and European growth, surveys showed on Wednesday.

Chinese factory activity fell less in January after Beijing lifted strict COVID restrictions late last year, a private sector survey showed.

Easing input-price pressures also brought early positive signs for Asia, with output cuts slowing in Japan and South Korea, the survey showed.

But there are doubts about whether Asia can withstand the damage from falling global demand and stubbornly high inflation, some analysts say.

“The worst of Asia’s recession is behind us, but the outlook is darkened by weakness in major export destinations such as the United States and Europe,” said Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo.

“With the ongoing recovery from Covid-19, Asian economies need a new growth engine. There hasn’t been one until now.”

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China’s Caixin/S&P Global manufacturing purchasing managers’ index (PMI) rose to 49.2 in January from 49.0 the previous month, remaining below 50, separating growth from contraction for the sixth straight month.

The data was better than expected with the official PMI survey released on Tuesday. But while the official PMI focuses largely on large Chinese businesses and state-owned enterprises, the Caixin survey focuses on small firms and coastal regions.

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

But Japan’s PMI survey showed that supplier delays were lower than at any time since February 2021, while input price and output inflation were the lowest in 16 months.

South Korean factory activity fell for the seventh straight month in January. The reading was 48.5, up from 48.2 in December but below the 50-point threshold.

While new orders in South Korea fell for a seventh straight month in January, the rate of decline was slightly slower than a month earlier, the survey showed.

“The immediate outlook for South Korea’s manufacturing sector looks challenging,” said Usamah Bhatti, economist at S&P Global Market Intelligence.

That said, companies were confident that global economic conditions would improve and stimulate demand.

PMI surveys showed factory activity expanded in January in Indonesia and the Philippines, but fell in Malaysia and Taiwan.

The International Monetary Fund on Tuesday raised its 2023 global growth outlook on “surprisingly resilient” demand in the United States and Europe and the reopening of China’s economy after Beijing lifted strict pandemic controls.

But the International Monetary Fund said global growth would still slow from 3.4 percent in 2022 to 2.9 percent in 2023, warning that the world could easily slip into recession.

Report by Lika Kihara; Edited by Bradley Pratt

Our Standards: The Thomson Reuters Trust Principles.

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