In January, factory activity in Asia fell as the boost from China's COVID reopening had yet to offset headwinds from the slowing U.S. and European growth, according to a survey 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 late last year, according to a private sector survey.
The surveys showed that there was a softening of input-price pressures for Asia, with the pace of contraction in output slowing in Japan and South Korea.
The worst of Asia's downturn is behind, but the outlook is clouded by weakness in major export destinations like the United States and Europe, said Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo.
Asian economies need a new growth engine with the recovery from COVID 19 under way. There isn't one so far. China's Caixin S&P Global manufacturing purchasing managers' index PMI went up to 49.2 in January from 49.0 in the previous month, keeping its output below the 50 mark that separates growth from contraction for a sixth month in a row.
The data was compared to a better-than-expected official PMI survey issued on Tuesday. The Caixin survey focuses on small firms and coastal regions, whereas the official PMI focuses on big and state-owned Chinese businesses.
Japan's au Jibun Bank PMI stood at 48.9 in January, unchanged from the previous month, as manufacturers felt the pain caused by weak global demand.
The Japan PMI survey showed that supplier delays were less prevalent than at any time since February 2021, while input and output price inflation was the slowest in 16 months.
South Korea's factory activity contracted for a seventh month in January. The rate of decline was slightly slower than a month earlier, as orders in South Korea shrank for a seventh month in January.
The immediate outlook for the South Korean manufacturing sector appears to be challenging, said Usamah Bhatti, economist at S&P Global Market Intelligence.
That said firms were confident that global economic conditions would improve and stimulate demand. PMI surveys showed that factory activity in Indonesia and the Philippines increased in January, but shrank in Malaysia and Taiwan.
The International Monetary Fund raised its global growth outlook slightly in the year 2023 on surprisingly resilient demand in the United States and Europe, and the reopening of China's economy after Beijing abandoned its strict pandemic controls.
In 2023, global growth would still slow to 2.9% from 3.4% in 2022, and the world could easily tip into recession, according to the International Monetary Fund.