Factories worldwide showed brisk recovery in February, signaling that the coronavirus and its omicron variant were having less of an impact on business, official data showed on Tuesday.

But the Ukraine crisis has rapidly emerged as a fresh risk that could disrupt supply chains and worsen cost pressures.

Strong international sanctions against Russia in response to its invasion of Ukraine have jolted markets and boosted oil prices, adding to headaches for Asian economies and businesses already reeling from rising input costs.

"The war in Ukraine is a major new source of uncertainty," Reserve Bank of Australia Governor Philip Lowe said on Tuesday after his bank kept interest rates at a record low.

Global supply chains, still not recovered from the pandemic, are now facing further disruption and cost inflation due to airspace closures, affecting the air freight industry.

Meanwhile, a spike in commodities prices caused by the invasion is also likely to prop up inflation, already at multiyear highs in many countries, and complicate policies for central banks as they balance the need to arrest an unwelcome rise in prices and underpin growth.

"The pickup in global inflation has been widespread and persistent and has shown few signs of having peaked," said Pawel Borowski, senior analyst at Fitch Ratings.

"High and rising inflation has been an enduring feature of economic recoveries in many major economies, shifting the outlook for monetary policy."

On March 17, the Bank of England (BoE) will raise interest rates again, a February Reuters poll forecast. The European Central Bank (ECB) will lift its deposit rate in the second half of this year and not wait until 2023 as previously expected, another Reuters poll showed.

The ECB is due to publish its latest staff projections for growth and inflation on March 10 and is widely expected to lift its forecast for price rises.

Inflation in the bloc hit a record high of 5.4% last month, preliminary official data is expected to show on Wednesday, likely adding pressure on the monetary authority to tighten policy.

"On inflation, we expect a huge upward revision to 2022," noted economists at JP Morgan.

Strong February

While the conflict in Eastern Europe now looms as a significant risk for the global economy, indicators from February showed conditions had been gradually improving before the significant escalation in the crisis.

Much of the European data was collected before the Russian invasion but IHS Markit’s February Purchasing Managers’ Index (PMI) showed although momentum in eurozone manufacturing growth waned slightly, activity was still strong as demand rose at the fastest pace in six months.

British factory output grew last month at the fastest rate since July, IHS Markit said.

Chinese factory surveys, both official and private sector, showed activity remaining in expansionary territory, pointing to resilience in the world's second-largest economy despite cost pressures.

China's official manufacturing PMI rose to 50.2 in February, a private survey showed on Tuesday, remaining above the 50-point mark that separates growth from contraction.

It picked up from a reading of 50.1 in January and confounded analysts' estimate of a slowdown to 49.9.

Despite the pickup, China's official PMI remains well below its pre-pandemic average, said Julian Evans-Pritchard, senior China economist at Capital Economics.

"The upshot is that China's economy appears to have struggled for momentum so far this year," he said.

Manufacturing activity also expanded in Malaysia, Vietnam and the Philippines as they gradually reopened their economies even as omicron infections continued to spread, surveys showed.

But Japan's factory activity growth slowed to a five-month low in February on continued COVID-19 curbs and rising input costs. Growth in activity also slowed in Taiwan and Indonesia.

Japan's PMI slipped to 52.7 in February from 55.4 in January, marking the slowest expansion since September last year.

"The most immediate hit from the crisis will come from rising oil prices, which will deal a severe blow to many Asian economies," said Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo.

"Russia is a big exporter of gas, rare metals and other goods critical for chip production. That means the crisis could aggravate supply chain disruptions, which would be bad news for countries like Japan, South Korea and Taiwan."