Asia’s factory activity weakens but China’s rebound offers some hope

TOKYO - Asia’s factory activity weakened in August as manufacturers felt the pinch from rising input costs and slowing global demand, but an unexpected rebound in China offered some hope for the region’s export-reliant economies, private surveys showed.

China’s private Caixin/S&P Global manufacturing purchasing managers’ index (PMI) rose to 51 in August from 49.2 in July, a survey showed on Friday, beating analysts’ forecasts and exceeding the 50-point threshold that separates growth from contraction.

The reading came a day after an official survey showed manufacturing activity contracted for a fifth straight month, offering a mixed picture on business conditions in the world’s second-largest economy.

While the rebound in China’s factory conditions seems to be a sign that official efforts to revive growth are starting to have some effect, manufacturing activity in most of Asia remained stagnant in August.

Japan’s factory activity shrank for a third straight month in August, while that for South Korea extended its longest-ever slump on wage pressures and soft exports, the surveys showed.

The data highlighted the challenges that Asia’s policymakers face in keeping inflation in check while cushioning the blow to their economies from sluggish global demand.

“It’s unlikely we’ll see a sharp, quick rebound in China’s economy. With the outlook for advanced economies also uncertain, it’s hard for Asian companies to be optimistic on the outlook,” said Dai-ichi Life Research Institute’s chief emerging market economist Toru Nishihama.

“Stubborn food inflation is also hurting consumption in some Asian countries. The region’s economy could be at a standstill.”

Asia has been among the few bright spots in the global economy, though persistent weakness in China clouds the outlook.

In revised forecasts issued in July, the International Monetary Fund projects emerging Asia’s economic growth will accelerate to 5.3 per cent in 2023 from 4.5 per cent in 2022. It expects China’s economy to expand 5.2 per cent this year after a 3 per cent increase in 2022.

Japan’s final au Jibun Bank manufacturing PMI came in at 49.6 in August, unchanged from July and staying below the 50-point threshold for a third straight month, as input costs rose, a private survey showed.

South Korea’s PMI fell to 48.9 in August from 49.4 in July, marking the 14th straight month of contraction on weak export orders.

Factory activity also contracted in Taiwan, Malaysia and the Philippines in August. India, by contrast, saw factory growth accelerate at the fastest pace in three months in August, driven by strong growth in new orders and output. REUTERS