Asia’s manufacturers are improving at the start of the year as the region becomes more optimistic about how China’s reopening might help offset an otherwise gloomy outlook for the rest of the world.
Factories in Southeast Asia last month ramped up production and purchasing as new orders piled in, data from S&P Global manufacturing purchasing managers’ indices (PMI) showed yesterday.
Signs that prices are softening and supply chain disruptions are easing also lifted business confidence for factory output over the next 12 months.
Thailand led the region with a January PMI reading of 54.5 — a jump from 52.5 a month earlier. The Philippines and Indonesia also posted readings above 50, the mark separating expansion from contraction.
While others in Southeast Asia remained in negative territory last month, most saw manufacturing conditions improve. Malaysia was the only country in the region where conditions worsened as PMI fell to a 17-month low of 46.5.
“With supply-side pressures easing, and inflation rates below their post-pandemic averages, this could support further improvements in business conditions in the months ahead,” S&P Global Market Intelligence economist Maryam Baluch said of Southeast Asia’s performance.
“It’s vital that demand conditions continue to recover and are able to support growth momentum into the rest of 2023,” Baluch said.
However, activity in North Asia was more mixed. South Korea’s manufacturing PMI improved slightly to 48.5 from 48.2 in December last year, although it was still below 50. Japan was steady at 48.9, the same as a month earlier.
However, surveys for both countries suggested that factories were increasing employment in anticipation of improving global economic conditions that would spur new business.
That was better than the outlook in Taiwan, where the PMI slump deepened to 44.3 from 44.6. Manufacturers there held a somber outlook, trimming their buying activity and inventory.
The data provide a sharper view of how the global demand outlook is affecting some of the world’s most critical trade engines.
The IMF on Tuesday said that tight monetary policy among central banks and Russia’s invasion of Ukraine would continue to weigh on economic activity throughout the year.
Yet the Washington-based institution still upgraded its global growth forecast slightly, in part on optimism that China’s reopening would buttress demand.
The emergence of the world’s second-largest economy from its strict “zero COVID” policy has also raised hopes in Asia that the region’s biggest trading partner would soon generate more demand for goods.
Data in China showed some signs of picking up last month, although the week-long Lunar New Year holiday likely weighed on factory activity, as many workers went home to celebrate with their families. COVID-19’s spread through the country also sickened some workers.
A private survey of factory activity yesterday showed that the sector had yet to recover, although the fall in output and new orders moderated.
The Caixin manufacturing index — which covers mainly smaller and export-oriented businesses — inched up to 49.2 from 49 in December last year. On Tuesday, the official PMI, which covers larger and state-owned firms, expanded slightly last month.
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