Asia’s factory activity fell in January as the boost from China’s COVID reopening failed to offset headwinds from slowing US and European growth, according to surveys released on Wednesday, underscoring the region’s economic recovery’s fragility.
According to a private sector survey, China’s factory activity slowed in January after Beijing lifted tough COVID curbs late last year.
Softening input-price pressures also provided early positive signs for Asia, with the rate of output contraction slowing in Japan and South Korea, according to the surveys.
However, some analysts are skeptical that Asia will be able to withstand the impact of slowing global demand and persistently high inflation.
“The worst 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 under way, Asian economies need a new growth engine. There isn’t one so far.”
The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) in China increased to 49.2 in January from 49.0 the previous month, remaining below the 50-point threshold that separates growth from contraction for the sixth consecutive month.
The figures were compared to a better-than-expected official PMI survey released on Tuesday. However, while the official PMI focuses on large and state-owned Chinese businesses, the Caixin survey focuses on small businesses and coastal regions.
The au Jibun Bank PMI in Japan remained unchanged in January at 48.9, as manufacturers felt the effects of weak global demand.
However, supplier delays were lower than at any time since February 2021, and input and output price inflation were the slowest in 16 months, according to the Japan PMI survey.
In January, factory activity in South Korea fell for the seventh consecutive month. The reading was 48.5, up from 48.2 in December but still short of the 50-point mark.
While new orders in South Korea fell for the seventh consecutive month in January, the rate of decline was slightly slower than a month earlier, according to the survey.
“The immediate outlook for the South Korean manufacturing sector appears challenging,” said Usamah Bhatti, economist at S&P Global Market Intelligence.
“That said, firms remained confident that global economic conditions would improve and stimulate demand.”
According to PMI surveys, factory activity increased in Indonesia and the Philippines in January but decreased in Malaysia and Taiwan.
The manufacturing sector in India began the year on a sour note, expanding at the slowest rate in three months in January as output and sales growth slowed.
The International Monetary Fund raised its global growth forecast for 2023 slightly on Tuesday, citing “surprisingly resilient” demand in the United States and Europe, as well as the reopening of China’s economy following Beijing’s abandonment of strict pandemic controls.
However, the IMF predicted that global growth would slow to 2.9% in 2023, down from 3.4% in 2022, and that the world could easily enter a recession.
(Adapted from ThePrint.in)
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