The factory activity in Türkiye expanded very slightly in January after shrinking for 10 straight months, while activity across Europe and Asia contracted again, surveys showed Wednesday, underscoring the fragility of the global economic recovery.
Still, both output and new orders continued to contract in Türkiye, while data showed factories in the eurozone at least may have passed the trough.
Türkiye’s Purchasing Managers' Index (PMI) for manufacturing rose to 50.1 last month from 48.1 in December, inching above the 50-point line that separates expansion from contraction, the Istanbul Chamber of Industry (ISO) and S&P Global said.
Some firms contributing to the survey pointed to some improvement in demand, although it remained fragile amid price rises, while output and new orders both shrank at a much slower rate than in December.
The panel showed that employment increased for the third month running, enabling firms to reduce backlogs of work, the panel showed.
Input cost inflation rose sharply in January primarily due to a rise in the minimum wage, the survey showed, with higher material costs and currency weakness also putting a burden on manufacturers.
In turn, firms increased their prices, with the rate of output price inflation accelerating to a seven-month high.
"Business conditions were stable in January, while the upward trajectories of the output and new orders indices amid signs of demand improving provide hope that expansions can be recorded in the coming months," said Andrew Harker, economics director at S&P Global Market Intelligence.
"While input cost and output price inflation did pick up due to the rise in the minimum wage, they remained some way below the highest points seen in 2021 and 2022."
Eurozone likely over the worst
Price pressures slackened, and the fall in demand moderated in the eurozone, driving a surge in optimism. The bloc eked out growth in the final three months of 2022, managing to avoid a recession, official data showed on Tuesday.
S&P Global's final manufacturing PMI climbed to a five-month high of 48.8 in January from December's 47.8, in line with a preliminary reading but still below the 50 mark.
"We think in, general, the worst is now past for both inflation and the activity front. The activity is not softening; it is going back up, so expectations are for a rebound," said Mateusz Urban, Senior Economist at Oxford Economics.
Manufacturers in Germany, Europe's largest economy, started 2023 with a slightly brighter outlook for the year ahead despite demand continuing to fall as inflation and supply chain problems eased.
In France, the bloc's second-biggest economy, factory activity returned to growth, albeit not as strongly as initially forecast.
But British manufacturing business shrank for a sixth month in January, kicking off a tough 2023 when the country's economy looks to fall into a recession.
Easing price pressures will, however, be welcomed by central bank policymakers. Soaring inflation – initially described as transient – has proved far more sticky than thought and prompted aggressive monetary tightening.
A Reuters poll found that the U.S. Federal Reserve (Fed) looks set to hike borrowing costs by 25 basis points later on Wednesday. The European Central Bank (ECB) and the Bank of England (BoE) are expected to add 50 basis points on Thursday, separate Reuters polls found.
Eurozone inflation eased for the third month in January, but relief may be limited as underlying price growth held steady, official data showed on Wednesday.
Asian strain
In Asia, factory activity contracted in January as the boost from China's COVID-19 reopening had yet to take full effect.
A private sector survey showed that China's factory activity shrank more slowly in January after Beijing lifted tough COVID-19 curbs late last year.
China's Caixin/S&P Global manufacturing PMI nudged up to 49.2 in January from 49 in December, staying below the 50 mark for a sixth straight month.
The data contrasted with a better-than-expected official PMI survey issued on Tuesday. But whereas the official PMI primarily focuses on big and state-owned Chinese businesses, the Caixin survey centers on small firms and coastal regions.
The surveys showed that softening input-price pressures also offered initial positive signs for Asia, with the pace of contraction in output slowing in Japan and South Korea.
But there is uncertainty about whether the region can weather the hit from slowing global demand and stubbornly high inflation, some analysts say.
"The worst of Asia's downturn is behind, weaknesses cloud the outlook in major export destinations like the United States and Europe," said Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo.
"With the recovery from COVID-19 underway, Asian economies need a new growth engine. There isn't one so far."
Factory activity expanded in January in Indonesia and the Philippines but shrank in Malaysia and Taiwan, PMI surveys showed. India's manufacturing industry started the year on a weaker note, expanding at the slowest pace in three months.
On Tuesday, the International Monetary Fund (IMF) slightly raised its 2023 global growth outlook on "surprisingly resilient" demand in the United States and Europe and the reopening of China's economy after Beijing abandoned its strict pandemic controls.
But the IMF said global growth would still slow to 2.9% in 2023 from 3.4% in 2022, and it warned the world could easily tip into recession.