Economy
Manufacturing
Asia’s manufacturing slows, adding to global
recession fears
Factory activity slows or declines in Japan, South
Korea and Taiwan amid supply disruptions and rising costs.
Published
On 1 Jul 2022
1 Jul 2022
Asia’s
manufacturing activity stalled in June as many companies were hit by supply
disruptions caused by China’s strict COVID-19 lockdowns, while sharp economic
slowdown risks in Europe and the United States reinforced fears of a global
recession.
While a
string of surveys on Friday showed China’s factory activity rebounding solidly
in June, a slowdown in Japan and South Korea, as well as a contraction in
Taiwan, highlighted the strain from supply disruptions, rising costs and
persistent material shortages.
China’s
manufacturing activity expanded at its fastest pace in 13 months in June, a
private survey showed, as the lifting of COVID lockdowns sent factories racing
to meet robust demand.
The
rollbacks of China’s lockdowns could ease supply chain snags, and allow
automakers and other manufacturers to resume operations after suffering severe
disruptions.
Some
analysts, however, warn of new headwinds amid growing market fears that
aggressive US interest rate hikes to tamp down soaring inflation will push the
country into recession, dragging down global demand.
Policy
tightening across many other economies amid red-hot consumer price pressures
have stoked fears of a sharp global economic downturn and shaken financial
markets in recent months.
Risk of
slowdown
“There’s
hope that China’s economy will pick up after a period of some weakness. But now
there’s a risk of slowdown in the US and European economies,” said Yoshiki
Shinke, chief economist at Japan’s Dai-ichi Life Research Institute.
“It will be
a tug-of-war between the two, though there’s a lot of uncertainty over the
global economic outlook.”
The final
au Jibun Bank Japan Manufacturing purchasing managers’ index (PMI) slipped to
52.7 in June from 53.3 in the previous month, staying above the 50-mark
separating contraction from expansion.
South
Korea’s S&P Global PMI also fell to 51.3 in June from 51.8 in May, dropping
for a second month due to the drag from supply constraints and a truckers’
strike in June.
Separate
data showed South Korean exports, seen as a proxy for global trade because the
nation’s manufacturers are positioned in many parts of the world supply chain,
growing at their slowest pace in 19 months in June.
On the
brighter side, China’s Caixin/Markit manufacturing PMI rose to 51.7 in June
from 48.1 in the previous month, marking the first expansion in four months.
That was well above analysts’ expectations for an uptick to 50.1.
The Caixin
survey, which focused on more export-oriented and small firms in coastal
regions, follows official data showing the country’s factory and service
sectors snapped three months of activity decline in June.
Taiwan’s
S&P global PMI fell to 49.8 in June from 50.0 in May, while that of Vietnam
was down to 54.0 in June from 54.7 in the previous month.
Lockdowns
in China have snarled regional and global logistics and supply chains, with
both Japan and South Korea reporting sharp declines in output.
China’s
economy has started to chart a recovery path out of the supply shocks caused by
strict lockdowns, though risks remain such as soft consumer spending and a fear
of a fresh wave of infections.
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