Factory activities revived in SEA as China reopens

Manufacturing activity in Asia is showing signs of improvement as the region becomes increasingly optimistic about China’s reopening and its ability to offset a gloomy global outlook. According to data from S&P Global Manufacturing Purchasing Managers’ Indexes, factories in Southeast Asia ramped up production and purchasing in January as new orders poured in. This was due to a combination of factors such as softening prices, easing supply chain disruptions, and an overall improvement in business confidence for factory output in the next 12 months.

Thailand led the region with a January PMI reading of 54.5, a significant increase from the previous month. The Philippines and Indonesia also posted PMI readings above 50, signifying expansion in their respective manufacturing sectors. While other countries in Southeast Asia remained in contraction territory, most saw a general improvement in conditions. Malaysia was the only exception, as PMI fell to a 17-month low of 46.5.

In North Asia, the picture was mixed. South Korea’s manufacturing PMI improved slightly to 48.5, while Japan remained steady at 48.9. In both countries, factories were increasing employment in anticipation of improving global conditions, although Taiwan’s PMI slump deepened to 44.3. The data provides a clear picture of how the global demand outlook is affecting some of the world’s major trade engines.

The International Monetary Fund (IMF) has stated this week that tight monetary policies among central banks and the ongoing conflict in Ukraine will continue to affect economic activity throughout the year. However, the organization slightly upgraded its global growth forecast, in part due to optimism surrounding China’s reopening and its potential to boost demand. The reemergence of China, the world’s second-largest economy, from its strict Covid Zero strategy has also raised hopes in Asia for increased demand for goods from the region’s largest trading partner.