Asian factories stagnate as China’s slowdown, supply constraints hit

October 1, 2021

By Leika Kihara

TOKYO (Reuters) – Asia’s manufacturing activity was lacklustre in September as signs of slowing Chinese growth and factory shutdowns caused by the coronavirus pandemic weighed on the region’s economies, surveys showed on Friday.

Factory activity in September shrank in Malaysia and Vietnam, and grew in Japan at the slowest rate in seven months, as chip shortages and supply disruptions added to the woes of a region still struggling to shake off the pandemic’s hit.

China’s waning economic momentum dealt a fresh blow, with the official Purchasing Manager’s Index (PMI) on Thursday showing the country’s factory activity unexpectedly shrank in September due to wider curbs on electricity use.

While the private Caixin/Markit Manufacturing PMI fared better than expected after slumping in August, growing signs of weakness in the world’s second-largest economy is clouding the outlook for neighbouring Asian countries.

“While coronavirus curbs on economic activity may be gradually lifted, the slow pace at which this will happen means Southeast Asian economies will stagnate for the rest of this year,” said Makoto Saito, an economist at NLI Research Institute.

The final au Jibun Bank Japan Manufacturing PMI slipped to 51.5 in September from 52.7 in the previous month, marking its slowest pace of expansion since February.

“Supply chain disruption continued to dampen activity and demand,” said Usamah Bhatti, economist at IHS Markit, of Japan’s PMI survey.

South Korea’s PMI for September rose to 52.4 from 51.2 in August, staying above the 50-mark threshold that indicates expansion in activity for a 12th straight month.

But continued supply chain disruptions dented business optimism for manufacturers.

Taiwan’s PMI eased to 54.7 in September from 58.5 in August, while Vietnam saw the index unchanged from August at 40.2.

Once seen as a driver of global growth, Asia’s emerging economies are lagging advanced economies in recovering from the pandemic’s pain as delays in vaccine rollouts and a spike in Delta variant cases hurt consumption and factory production.

(Reporting by Leika Kihara; Editing by Ana Nicolaci da Costa)

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