# Asia’s factory activity contracts despite China’s COVID reopening
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-02-01
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Asia's Factory Activity Contracts in January Amid
Meta Description: Asia's factory activity contracted in January amid slowing global demand and stubbornly high inflation, posing challenges for the region's economic
URL: https://financedigest.com/asias-factory-activity-contracts-despite-chinas-covid-reopeninghtml

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By Leika Kihara

TOKYO (Reuters) – Asia’s factory activity contracted in January as the boost from China’s COVID reopening had yet to offset headwinds from slowing U.S. and European growth, surveys showed on Wednesday, underscoring the fragility of the region’s economic recovery.

China’s factory activity shrank more slowly in January after Beijing lifted tough [COVID curbs](https://www.financedigest.com/were-going-to-be-free-chinese-cheer-as-covid-curbs-are-loosened.html "‘We’re going to be free’: Chinese cheer as COVID curbs are loosened") late last year, a private sector survey showed.

Softening input-price pressures also [offered initial positive signs](https://www.financedigest.com/discount-dining-clubs-tastecard-and-gourmet-society-grow-their-offering-as-chimichanga-and-spaghetti-house-both-sign-up.html "Discount dining clubs tastecard and Gourmet Society grow their offering as Chimichanga and Spaghetti House both sign up") for Asia, with the pace of contraction in output slowing in Japan and South Korea, the surveys showed.

But there is uncertainty about whether Asia can weather the [hit from slowing global demand and stubbornly high inflation](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc-2.html "UK shop price inflation hits record 8% in January: BRC"), some analysts say.

The worst of Asia’s downturn is behind, but the [outlook is clouded by weaknesses](https://www.financedigest.com/uk-to-avoid-recession-this-year-but-outlook-still-weak-bcc-says.html "UK to avoid recession this year but outlook still weak, BCC says") 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](https://www.financedigest.com/covid-19-recovery-tips-for-2021.html "COVID-19 Recovery tips for 2021") under way, Asian economies need a new growth engine. There isn’t one so far.”

China’s Caixin/S&P [Global manufacturing purchasing managers’ index](https://www.financedigest.com/2017-global-payroll-complexity-index-reveals.html "2017 Global Payroll Complexity Index Reveals ") (PMI) nudged up to 49.2 in January from 49.0 in the previous month, staying below the 50 mark that separates growth from contraction for a sixth straight month.

The [data was contrasted with a better-than-expected official PMI survey](https://www.financedigest.com/survey-data-28-brits-say-brexit-sped-decision-buy-uk-holiday-home-year.html "Survey Data: 28% of Brits Say Brexit Has Sped Up Their Decision to Buy a UK Holiday Home This Year") issued on Tuesday. But whereas the official PMI largely focuses on [big and state-owned Chinese businesses](https://www.financedigest.com/smishing-is-a-new-virus-plaguing-big-business-conversational-commerce-to-the-rescue.html "‘Smishing’ is a new ‘virus’ plaguing big business – Conversational Commerce to the rescue!"), the Caixin survey centres on small firms and coastal regions.

Japan’s au Jibun Bank PMI stood at 48.9 in January, unchanged from the previous month, as manufacturers felt the pain from weak [global demand](https://www.financedigest.com/the-demand-for-agile-banking-during-the-global-economic-slowdown.html "The demand for ‘Agile Banking’ during the global economic slowdown").

But supplier delays were less prevalent than at any [time since](https://www.financedigest.com/soccer-arsenal-reach-womens-champions-league-semis-for-first-time-since-2013.html "Soccer-Arsenal reach Women’s Champions League semis for first time since 2013") February 2021, while input and output price inflation were the slowest in 16 months, the Japan PMI survey showed.

South Korea’s [factory activity](https://www.financedigest.com/global-factory-activity-weakens-as-demand-falters.html "Global factory activity weakens as demand falters") contracted for a 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 shrank for a seventh [straight month](https://www.financedigest.com/spanish-manufacturing-output-down-for-6th-straight-month-in-dec-pmi.html "Spanish manufacturing output down for 6th straight month in Dec -PMI") in January, the rate of decline was slightly slower than a month earlier, the survey showed.

The immediate outlook for the South Korean manufacturing [sector appears challenging,”](https://www.financedigest.com/mission-critical-sector-challenges.html "MISSION CRITICAL SECTOR CHALLENGES") said Usamah Bhatti, economist at S&P Global Market Intelligence.

That said, [firms remained confident that global](https://www.financedigest.com/sp-global-acquires-firm-to-bolster-capability-to-track-commodity-shipments.html "S&P Global acquires firm to bolster capability to track commodity shipments") economic conditions would improve and stimulate demand.

[Factory activity](https://www.financedigest.com/asias-factory-activity-weakens-on-global-slowdown-cost-pressures.html "Asia’s factory activity weakens on global slowdown, cost pressures") expanded in January in Indonesia and the Philippines but shrank in Malaysia and Taiwan, PMI surveys showed.

India’s manufacturing industry started the year on a weaker note, expanding at the slowest pace in three [months in January as output](https://www.financedigest.com/japans-factory-output-posts-biggest-fall-in-8-months-on-weak-autos-chips-sectors.html "Japan’s factory output posts biggest fall in 8 months on weak autos, chips sectors") and sales growth slackened.

The International Monetary Fund on Tuesday slightly raised its 2023 global growth outlook on “surprisingly resilient” demand in the United States and Europe and the [reopening of China’s](https://www.financedigest.com/asian-shares-muted-as-investors-fret-over-china-reopening.html "Asian shares muted as investors fret over China reopening") economy after Beijing abandoned its strict pandemic controls.

But the IMF said global growth would still slow to 2.9% in 2023 from 3.4% in 2022, and it [warned that the world could easily tip into recession](https://www.financedigest.com/the-recent-bank-of-england-meeting-the-biggest-rate-hike-recession-warning-and-the-fallout.html "The recent Bank of England meeting, the biggest rate hike, recession warning and the fallout").

(Reporting by Leika Kihara; Editing by Bradley Perrett)


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