Asia’s manufacturing resurgence softened last month as supply shortages and costs rose at factories after Russia’s invasion of Ukraine.
It is the latest signal of how far the effects of the war have spread and another setback for the region after the impact of restrictions amid the COVID-19 pandemic.
Asian economies are relying on their factory sectors to help drive recoveries, while virus curbs hold back traditional growth engines of consumption.
Manufacturing hubs South Korea and Vietnam had the sharpest downturn in their manufacturing purchasing managers’ indices (PMI), S&P Global said.
Taiwan, Thailand and Malaysia also declined, with the latter slipping below the 50 mark that separates expansion from contraction.
Japan’s PMI jumped to 54.1 from 52.7 in February as declining COVID-19 cases allowed factories to ramp up production, compiler au Jibun Bank said.
Indonesia and the Philippines also posted an improvement.
Rising energy costs and ongoing supply disruptions mean the region’s PMIs will likely soften further, said Chua Hak Bin (蔡學敏), senior economist at Maybank Investment Banking Group in Singapore.
“There is a risk some Asian countries may see PMI slip below 50 and into contraction territory in the coming months,” Chua said.
For China, a private gauge of manufacturing activity dropped last month by the most since the pandemic’s onset as COVID-19 lockdowns took a toll on production and sales.
The Caixin Manufacturing PMI fell to 48.1 last month from 50.4 in February, Caixin and S&P Global said in a statement.
That reading came a day after the official manufacturing and non-manufacturing PMIs for last month posted larger-than-expected declines and slipped to contraction territory for the first time in about half a year.
A slowdown in Asia has potential knock-on effects for the rest of the global economy.
The region is the world’s top manufacturing base, and its exports ranging from energy to food are critical in augmenting supplies and tamping down prices in nations beginning to emerge from the pandemic.
In a warning sign for global demand given its status as a weather vane for trade, South Korean new export orders fell by their quickest pace since July 2020.
Input price inflation hit a three-month high.
“Manufacturing firms noted the impact that economic sanctions on Russia and the war with Ukraine had on international demand,” Usamah Bhatti, an economist at S&P Global, said in a release.
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