Asia factories weak despite China rebound, fuels fears of global recession

REUTERS

TOKYO — Manufacturing activity in Asia came to a standstill in June as many businesses were hit by supply disruptions due to China’s strict 2019 coronavirus disease (COVID-19) lockdowns, while risks of sharp economic slowdown in Europe and the United States raised fears of a global intensified recession.

A series of surveys on Friday showed Chinese manufacturing activity rebounded strongly in June, although a slowdown in Japan and South Korea, as well as a contraction in Taiwan, highlighted the tension of supply disruptions, rising costs and ongoing material shortages.

China’s manufacturing activity grew its fastest in 13 months in June, a private survey found, as the lifting of the COVID-19 lockdowns left factories racing to meet solid demand.

Rolling back China’s lockdowns could alleviate supply chain problems and allow automakers and other manufacturers to resume operations after serious disruptions.

However, some analysts are warning of new headwinds, such as growing market fears that aggressive rate hikes in the US to contain rising inflation will push the country into recession and weigh on overall global demand.

Policy tightening in many other economies amid red-hot consumer price pressures has fueled fears of a sharp global economic downturn and shaken financial markets in recent months.

“There is hope that the Chinese economy will recover after a period of weakness. But now there is a risk of slowing down 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, although there is a lot of uncertainty about the global economic outlook.”

Jibun Bank Japan Manufacturing’s purchasing managers’ index (PMI) fell from 53.3 in the previous month to 52.7 in June, holding it above 50, a division between contraction and expansion.

South Korea’s S&P Global PMI also fell to 51.3 in June from 51.8 in May, falling for a second month on the back of supply constraints and a truck driver’s strike in June.

Separate data showed South Korean exports, seen as a proxy for global trade, as the country’s manufacturers are positioned in many parts of the global supply chain, growing at the slowest pace in 19 months in June.

On the upside, 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 analyst expectations for a rise to 50.1.

The Caixin survey, which focused on more export-oriented and small businesses in coastal areas, follows official data showing the country’s manufacturing and service sectors experienced three months of slowdown in activity in June.

The global PMI of Taiwan’s S&P fell to 49.8 in June from 50.0 in May, while Vietnam’s fell to 54.0 in June from 54.7 in the previous month.

Lockdowns in China have entangled regional and global logistics and supply chains, with both Japan and South Korea reporting sharp declines in production.

The Chinese economy has begun to chart a recovery path from the supply shocks caused by strict lockdowns, although risks remain, such as soft consumer spending and fears of another wave of infections. † Play Kihara / Reuters

Leave a Comment

Asia factories weak despite China rebound, fuels fears of global recession

REUTERS

TOKYO — Manufacturing activity in Asia came to a standstill in June as many businesses were hit by supply disruptions due to China’s strict 2019 coronavirus disease (COVID-19) lockdowns, while risks of sharp economic slowdown in Europe and the United States raised fears of a global intensified recession.

A series of surveys on Friday showed Chinese manufacturing activity rebounded strongly in June, although a slowdown in Japan and South Korea, as well as a contraction in Taiwan, highlighted the tension of supply disruptions, rising costs and ongoing material shortages.

China’s manufacturing activity grew its fastest in 13 months in June, a private survey found, as the lifting of the COVID-19 lockdowns left factories racing to meet solid demand.

Rolling back China’s lockdowns could alleviate supply chain problems and allow automakers and other manufacturers to resume operations after serious disruptions.

However, some analysts are warning of new headwinds, such as growing market fears that aggressive rate hikes in the US to contain rising inflation will push the country into recession and weigh on overall global demand.

Policy tightening in many other economies amid red-hot consumer price pressures has fueled fears of a sharp global economic downturn and shaken financial markets in recent months.

“There is hope that the Chinese economy will recover after a period of weakness. But now there is a risk of slowing down 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, although there is a lot of uncertainty about the global economic outlook.”

Jibun Bank Japan Manufacturing’s purchasing managers’ index (PMI) fell from 53.3 in the previous month to 52.7 in June, holding it above 50, a division between contraction and expansion.

South Korea’s S&P Global PMI also fell to 51.3 in June from 51.8 in May, falling for a second month on the back of supply constraints and a truck driver’s strike in June.

Separate data showed South Korean exports, seen as a proxy for global trade, as the country’s manufacturers are positioned in many parts of the global supply chain, growing at the slowest pace in 19 months in June.

On the upside, 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 analyst expectations for a rise to 50.1.

The Caixin survey, which focused on more export-oriented and small businesses in coastal areas, follows official data showing the country’s manufacturing and service sectors experienced three months of slowdown in activity in June.

The global PMI of Taiwan’s S&P fell to 49.8 in June from 50.0 in May, while Vietnam’s fell to 54.0 in June from 54.7 in the previous month.

Lockdowns in China have entangled regional and global logistics and supply chains, with both Japan and South Korea reporting sharp declines in production.

The Chinese economy has begun to chart a recovery path from the supply shocks caused by strict lockdowns, although risks remain, such as soft consumer spending and fears of another wave of infections. † Play Kihara / Reuters

Leave a Comment