Asia’s factories face glitch as virus slams region

Powering on: Employees working on the production line at the TYM Corp tractor factory in South Korea. Asia’s export engines are scrambling to minimise Covid-19 disruptions to production. ― Bloomberg

SINGAPORE: Asia’s manufacturing managers are seeing stumbles in the area’s economic recovery as the pandemic continues to weigh on output and vaccination lags other regions.

Malaysia’s manufacturing purchasing managers’ index (PMI) declined to 39.9 in June, its lowest in more than a year, from 51.3. Vietnam, which also has been battling a recent resurgence of the virus, slipped to 44.1, below the 50 level that separates expansion and contraction.

“The recent rise in Covid-19 infections and associated containment measures once again dampened demand, stymied production and disrupted supply chains, ” said Chris Williamson, chief business economist at IHS Markit. “Companies grew more concerned about the potential impact of further virus waves.”

South Korea and Taiwan, export powerhouses that continue to benefit from the boom in the electronics cycle and surging demand for semiconductors, remained well into expansion territory, at 53.9 and 57.6, respectively.

Asia’s export engines are scrambling to minimise disruptions to production as the virus flares up in parts of the region, including recent surges in Indonesia and Vietnam. Global trade has remained a tailwind for economic growth, even as shipping costs remain elevated.

The relatively steady expansion in the world’s second-largest economy is a boon for the rest of Asia, much of which relies on China as its top trading partner. The Caixin Media and IHS Markit manufacturing PMI for China eased to 51.3 from 52, according to a statement yesterday morning. The gauge has been in expansion since May 2020.

China’s official manufacturing PMI was little changed at 50.9 in June, marking a 16th straight month of expansion, the National Bureau of Statistics said Wednesday. The non-manufacturing gauge, which measures activity in the construction and services sectors, decreased to 53.5 from 55.2, largely due to virus outbreaks in parts of the country.

Exports from South Korea, a bellwether for global trade, rose more than expected in June, government data yesterday showed, continuing a rally that has officials expecting shipments to reach record highs this year.

“There is a lot of investment currently underway to address the global shortfall of supply relative to the demand for semiconductors, ” including around United States-China technology conflicts, Rob Carnell, head of Asia-Pacific research at ING Groep in Singapore, said in a report Wednesday. “Extra supply will not come on-stream quickly, ” even as electronics demand remains strong.

In Japan, where the au Jibun Bank and IHS Markit PMI eased to 52.4 from 53 in May, businesses have grown more upbeat on the outlook, with sentiment at the strongest level since the series started in July 2012. That matches the Bank of Japan’s Tankan survey, which showed confidence among Japan’s large manufacturers improving for a fourth straight quarter. ― Bloomberg

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