Asia’s factory activity slowed last month as China’s heavy-handed COVID-19 lockdowns continued to disrupt supply chains and dampen demand, adding to woes for some of the region’s economies that were under strain from surging raw material costs.
Manufacturers slowed activity last month in countries ranging from Taiwan to Japan and Malaysia, business surveys showed yesterday, a sign of the challenge that policymakers face in combating inflation with tighter monetary policy — without crippling growth.
China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) stood at 48.1 points last month, improving slightly from 46.0 in April, but staying below the 50-point threshold that separates contraction from expansion, a private survey showed.
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The outcome was in line with official data from China on Tuesday, which showed that factory activity last month fell at a slower pace. While COVID-19 curbs are being rolled back in some cities, they continue to weigh heavily on confidence and demand.
“Disruptions to supply chains and goods distribution may gradually ease as Shanghai’s lockdown ends, but we’re not out of the woods, as China hasn’t abandoned its ‘zero COVID’ policy altogether,” said Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo.
“Rising inflation is forcing some Asian central banks to tighten monetary policy. There’s also the risk of market volatility from US interest rate hikes. Given such layers of risks, Asia’s economy may remain weak for most of this year,” Nishihama said.
Lockdowns in China have snarled regional and global logistics and supply chains, with Japan and South Korea reporting sharp declines in output.
Japan’s manufacturing activity last month grew at the weakest pace in three months and manufacturers reported a renewed rise in input costs, the PMI survey showed, as the fallout from China’s lockdowns and the Ukraine conflict pressured the economy.
The final au Jibun Bank Japan PMI fell to a seasonally adjusted 53.3 points last month from 53.5 in April, marking the slowest pace since February.
“Both output and new orders rose at softer rates, with the latter rising at the weakest pace for eight months amid sustained supply chain disruption and raw material price hikes,” S&P Global Market Intelligence economist Usamah Bhatti said. “Disruptions were exacerbated by renewed lockdown restrictions across China and contributed to a further sharp lengthening of suppliers’ delivery times.”
Taiwan’s manufacturing activity last month stood at 50.0 points, down from 51.7 from April.
Factory activity in the Philippines last month also slowed to 54.1 points from 54.3 in April, while activity in Malaysia fell to 50.1 points from 51.6 in April, PMI surveys showed.
India’s factory activity last month expanded at a better-than-expected pace, with demand resilient despite persistently high inflation.
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