Factory performance in Asia was largely mixed in January, surveys showed on Thursday, as weak Chinese demand rattled the region's economies in early 2024.
China's Caixin/Standard & Poor's global manufacturing purchasing managers' index stood at 50.8 points in January, unchanged from last December and above the 50-point mark that separates growth from contraction.
The reading contradicted an official Chinese survey that showed manufacturing activity contracted for the fourth consecutive month. Deflationary pressures have been a lingering blight in the world's second-largest economy, indicating underlying weakness in demand.
Together, these indicators indicate that the performance of the Chinese economy remains weak, and support market expectations for further policy support measures this year.
The picture was mixed for Asian economies, with some bearing the brunt of weaker Chinese demand better than others.
Factory activity in South Korea expanded for the first time in 19 months in January due to increased demand for goods in key markets such as the US and China.
But activity contracted in Taiwan and Malaysia and expanded at a slower pace in the Philippines, surveys show.
“For countries like South Korea, the impact from weaker Chinese demand has been partially offset by a slowdown in exports to the United States,” said Toru Nishihama, chief emerging market economist at Dai-ichi Research Institute. But external and domestic demand remains weak in China. “This means that the global economy lacks a key driver of growth, which does not bode well for Asian economies.”
Manufacturing activity in Japan shrank for an eighth straight month as production and new orders fell, with some analysts warning of a hit from production shutdowns at Daihatsu, a unit of automaker Toyota.
Toyota Group's production plan has a decisive impact on the Japanese economy, as it affects many spare parts suppliers spread across the country.
Data showed on Wednesday that Japanese industrial production rose last December, but manufacturers surveyed by the government expected production to fall 6.2 percent in January, a government official pointed to the impact of the Daihatsu production suspension.
The International Monetary Fund on Wednesday cut its growth forecast for Asia to 4.5 percent expansion this year, driven by strong U.S. demand and support from expected stimulus measures in China.
But the IMF said the economy would remain uneven across the board, with Japan expected to slow growth to 0.9 percent, as opposed to India's expected 6.5 percent expansion.
The International Monetary Fund expects China's economy to grow 4.6 percent this year, down from 5.2 percent in 2023.