Global factory activity improves on growing demand

By Leika Kihara and Indradip Ghosh BENGALURU/TOKYO, Feb 2 (Reuters) – Global factory activity improved in January, with a better performance by key Asian exporters and a return to manufacturing expansion in the euro zone and the United States, private surveys showed on Monday, suggesting the hit from higher U.S. tariffs may have run its course for now. The HCOB Eurozone Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 49.5 in January from December's nine-month low of 48.8, with a return to output growth after a contraction the month before.  In the U.S., the Institute for Supply Management's manufacturing PMI rebounded to 52.6, rising above the 50 threshold for the first time in 12 months, from 47.9 in December. Manufacturing activity growth in export powerhouses Japan and South Korea hit multi-year highs, suggesting brightening prospects. China's factory activity expanded at a faster pace in January too as export orders rebounded, which contrasted with an earlier official report showing activity faltering. "Exports from most countries have surged in recent months, and we think the near-term outlook for Asia's export-oriented manufacturing sectors remains favourable," said Shivaan Tandon, Asia Economist at Capital Economics. ASIAN EXPORTERS SEE PICK-UP IN DEMAND The RatingDog China General Manufacturing Purchasing Managers' Index, compiled by S&P Global, rose to 50.3 from 50.1 in December, exceeding the 50-mark that separates growth from contraction and hitting the highest level since October. The upbeat survey likely reflects China's export drive that offset weak domestic consumption and helped the world's second-largest economy expand 5.0% last year. Japan's S&P PMI rose to the strongest level since August 2022, driven by robust demand from key markets such as the U.S. and Taiwan. "Japan's manufacturing industry propelled itself back into growth territory at the start of 2026, with firms signalling the strongest upturns in output and new orders for nearly four years," said Annabel Fiddes, an economics associate director at S&P Global Market Intelligence. South Korea's PMI also rose, marking the highest reading since August 2024. The International Monetary Fund raised its 2026 global growth forecast last month on receding fears over the hit from U.S. tariffs, and a continued AI investment boom that has fueled asset wealth and expectations of productivity gains. Brightening prospects for global demand have helped factory activity expand across Asia. Taiwan's PMI rose to 51.7 in January from 50.9 in December, while that of Indonesia rose to 52.6 from 51.2. India's manufacturing activity inched up in January as demand improved slightly, though the gain wasn't strong enough to lift business optimism or meaningfully increase hiring. EURO ZONE OUTPUT RETURNS TO GROWTH Manufacturing output in the common currency area climbed back above the 50 threshold to 50.5 in January from 48.9 in December. Factory activity in Germany – the bloc's largest economy – began 2026 on a positive note, with output returning to expansion after a brief contraction in December. Meanwhile, France recorded its fastest pace of output expansion in almost four years. However, manufacturing sectors in Spain, Germany, Italy and Austria all remained in contraction territory. "While it is too early to say, today's PMI might signal the start of converging growth rates in the euro zone's manufacturing sector," said Paolo Grignani, senior economist at Oxford Economics. "All in all, the European manufacturing sector remained in the doldrums at the start of the year with no clear indication that the broad sideways trend for output is about to end." In Britain, outside the European Union, the manufacturing PMI rose to its highest since August 2024 as inflows of new work expanded at the quickest rate in nearly four years. (Reporting by Indradip Ghosh and Leika Kihara; Editing by Sam Holmes and Toby Chopra)

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