TOKYO – Asia’s factory activity stalled in February with the exception of China, as slowing global demand, stubbornly high inflation and the fallout from past interest rate hikes weighed on the region’s economies, surveys showed on Wednesday.
Recovering momentum in China following its exit from stringent COVID-19 policies late last year offered hopes of a more subdued downturn in the global economy, as the U.S. Federal Reserve stays on its higher for longer interest rate path.
China’s manufacturing activity expanded at the fastest pace in more than a decade in February, according to an official index, while a private sector survey also showed activity rising for the first time in seven months.
India and Australia saw economic growth slow in the quarter to December, and South Korea’s exports fell in February for a fifth straight month, highlighting the pain slowing global demand was inflicting on the region’s manufacturers.
The region’s weaker data underscores the challenge Asian policymakers face in reining in inflation with higher interest rates, without choking off their economic recoveries already facing pressure from the global economic slowdown, analysts say.
“Overseas economies are showing stronger signs of slowdown” as the effect of fast-pitched interest rate hikes begin to appear in many countries, Bank of Japan (BOJ) board member Junko Nakagawa said on Wednesday.
China’s recovering economy, the world’s second largest, may not be enough to offset headwinds from weak chip demand and supply constraints for export-reliant economies such as Japan.
Japan’s final au Jibun Bank PMI fell to 47.7 in February from January’s 48.9, dropping at the fastest pace in more than two years, a survey showed on Wednesday.
The weak outcome followed data showing a big drop in Japan’s factory output in January on slumping production of cars and semiconductor equipment, casting doubt on the BOJ’s view the economy was on course for a steady recovery.
Factory activity continued to shrink in Taiwan and Malaysia in February, and expanded at a slower pace than in January in the Philippines, surveys showed.
Separate data showed South Korea’s exports fell 7.5 percent in February from a year earlier, marking the fifth straight month of declines, partly due to a plunge in semiconductor exports.
Policymakers hope China’s re-opening from COVID-19 curbs, and resilience seen so far in U.S. and European economies, will underpin global growth this year.
The International Monetary Fund last month raised its 2023 global growth outlook slightly due to “surprisingly resilient” demand in the United States and Europe, an easing of energy costs and the reopening of China’s economy after Beijing abandoned its strict COVID restrictions.