Asia’s manufacturing shows mixed picture; China’s PMI data hints at challenges

Asia’s January manufacturing shows a mixed picture as China’s contrasting PMI data hints at economic challenges, impacting regional dynamics.

In January, manufacturing performance across Asia exhibited a mixed pattern, reflecting the impact of soft Chinese demand on the region’s economies at the outset of 2024. China’s private-sector Caixin/S&P Global manufacturing purchasing managers’ index (PMI) remained steady at 50.8, unchanged from December and surpassing the growth-contraction threshold of 50. However, an official survey indicated manufacturing contraction for the fourth consecutive month, with deflationary pressures signalling lingering weakness in demand.

The contrasting data in China suggests an underperforming economy, reinforcing market expectations for additional policy support measures in the coming months. This uncertainty had a varying impact on Asian economies, with South Korea experiencing a positive turn as factory activity expanded in January for the first time in 19 months. Improved demand for goods in key markets like the United States and China contributed to this upturn.

Conversely, Taiwan and Malaysia witnessed a contraction in manufacturing activity, while the Philippines experienced slower expansion. Analysts attribute South Korea’s resilience to weak Chinese demand to its robust exports to the United States. However, concerns persist as both external and domestic demand appear lacklustre in China, depriving the global economy of a crucial growth driver, especially for Asian economies.

Japan faced challenges as manufacturing activity contracted for an eighth consecutive month in January, with output and new orders declining. The production suspension at Daihatsu, a unit of auto giant Toyota Motor Corp, played a significant role, impacting Japan’s economy due to its influence on numerous parts suppliers across the country.

India, in contrast, saw a notable improvement in manufacturing in January, with factory activity expanding at its fastest pace in four months, fueled by robust demand. The International Monetary Fund (IMF) revised its growth forecast for Asia, projecting a 4.5% expansion in 2024. This optimistic outlook is driven by robust U.S. demand and anticipated stimulus measures in China.

However, the IMF warns of divergent recovery paths across economies. Japan is expected to witness slowed growth at 0.9%, while India is projected to experience a substantial 6.5% expansion. China’s economy is anticipated to grow by 4.6% in 2024, a deceleration from the 5.2% growth observed in 2023. The mixed manufacturing performance in Asia underscores the delicate balance between global demand dynamics and regional economic resilience in the face of challenges.