Japan’s factory activity growth slowed to a four-month low this month as China’s COVID-19 curbs disrupted supply chains, while many other economies in Asia were also facing headwinds amid growing risks to the outlook from a potential US recession.
Australia’s manufacturing activity held steady this month, data showed yesterday, which, together with Japan’s figures, came ahead of a string of European and US purchasing managers’ index (PMI) surveys due out later in the day.
The readings would be closely scrutinized as financial markets fret over sharp interest rises by the US Federal Reserve, and further aggressive tightening planned over coming months, which have substantially raised the risk of a US recession.
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“The global macroeconomic outlook has deteriorated materially since end-2021,” said Fitch Ratings, which this month slashed this year’s global growth outlook to 2.9 percent from 3.5 percent in March.
STAGFLATION
“Stagflation, which is characterized by persistent high inflation, high unemployment and weak demand, has become the dominant risk theme since late 1Q22 and a plausible potential risk scenario,” it said in a report released this week.
A growing number of market players, including US investment firm Pacific Investment Management Co, are warning of the risk of a recession as central banks across the globe tighten monetary policy to fight persistently high inflation.
The au Jibun Bank flash Japan manufacturing PMI slipped to 52.7 from 53.3 last month, marking the slowest expansion since February, the survey showed yesterday.
In a sign of the COVID-19 pandemic’s lingering impact, auto giant Toyota Motor Corp cut its global production plan for next month by 50,000 vehicles, as semiconductor shortages and COVID-19 parts supply disruptions continued to curb output.
SLOW DELIVERIES
“Despite the recent easing of lockdowns in China, suppliers’ delivery times continued to lengthen last month, albeit at a slightly slower pace,” said Marcel Thieliant, senior Japan economist at Capital Economics.
The key for Japan would be whether consumption rebounds strongly enough from a pandemic-induced slump, to offset emerging external headwinds such as an expected US slowdown, analysts said.
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