Asia’s factory pain deepened last month as the slump in global trade caused by the COVID-19 pandemic worsened, with export powerhouses Japan and South Korea suffering the sharpest declines in business activity in more than a decade.
A series of manufacturing surveys released yesterday suggest that any rebound in businesses would be some time off, even though China’s factory activity unexpectedly returned to growth last month.
China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) hit 50.7 last month, marking the highest reading since January as easing of lockdowns allowed companies to get back to work and clear outstanding orders.
Photo: AFP
However, with many of China’s trading partners still restricted, its new export orders remained in contraction, the private business survey showed yesterday.
China’s official PMI survey on Sunday showed that the recovery in the world’s second-largest economy was intact, but fragile.
Japan’s factory activity last month shrank at the fastest pace since 2009, a separate private sector survey showed.
The final au Jibun Bank Japan Manufacturing PMI in April fell to a seasonally adjusted 38.4 from 41.9, its lowest since March 2009.
South Korea also saw manufacturing slump at the sharpest pace in more than a decade.
The IHS Markit PMI edged down to 41.3, the lowest since January 2009 and below 41.6 in April.
Capital Economics Ltd said that the region’s manufacturing sector is in deep recession.
“Industry is likely to have seen an initial jump from the easing of lockdown restrictions. And things are likely to continue improving very gradually over the coming months as external demand recovers,” Capital Economics wrote. “But output is still likely to be well below normal levels for many months to come, as domestic and global demand remain very depressed.”
Taiwan’s manufacturing activity also fell last month. Vietnam, Malaysia and the Philippines saw PMIs rebound from April, although the indices all remained below the 50-mark threshold that separates contraction from expansion.
Official data showed South Korea extending its exports plunge for a third straight month.
India’s factory activity contracted sharply, extending the major decline seen in April as a government-imposed lockdown hammered demand.
Asia’s economic woes are likely to be echoed in other parts of the world, including Europe, where economies continue to suffer huge damage in factory and service sectors.
With many countries starting to ease lockdown restrictions imposed to stop the spread of the virus, which has infected over 5.5 million people globally, equity markets are rallying on hopes for a swift return to health and prosperity.
However, the trough in global economic activity would be deeper and the rebound is likely to take longer than previously predicted as the pandemic spreads in waves.
The IMF last month said that the global economy would take much longer than expected to recover fully from the virus shock, suggesting a downgrade to its projection for a 3 percent contraction this year.
A US-China spat over Hong Kong’s status and Beijing’s handling of the pandemic could sour business sentiment and add to already huge strains on the global economy.
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