According to surveys released on Thursday, Asia’s factory activity fell in August while China’s zero COVID limits and cost constraints continued to impact businesses, dimming the prospects for the region’s flimsy rebound.
Sluggish demand was adding to the problems for businesses already dealing with ongoing supply restrictions as evidenced by the weak manufacturing activity in nations ranging from Japan, South Korea, China, and Taiwan.
The U.S. Federal Reserve’s determination to keep hiking interest rates aggressively is also affecting the business climate by fuelling recession fears in one of Asia’s main export markets, according to economists.
Supply lines are still being disrupted by China’s economic limits and geopolitical concerns with the United States. According to Toru Nishihama, head economist of the Tokyo-based Dai-ichi Life Research Institute, rising inflation is also harming domestic demand throughout Asia.
Fears about a US recession are also detrimental. Since the economies of the United States and China are the two main drivers of global growth, when any of them falters, businesses are difficult.
Statistics released on Thursday stated that China’s independent Caixin manufacturer purchasing managers’ index (PMI) declined for the first time in over three months in August due to production disruptions from weak demand, power shortages, and new COVID-19 flare-ups.
The unusually low reading was consistent with China’s official PMI, which was made public on Wednesday and fell below the 50-point threshold that distinguishes monthly expansion from contraction.
Powerhouse exporters were likewise lacking. According to PMI data for both nations, in August, factory activity in South Korea declined at the fastest rate in two years and industrial activity in Japan increased at its weakest pace in over a year.
Taiwan’s manufacturing activity also fell off a cliff, with new orders and production declining at the fastest rate since the pandemic’s first wave in May 2020.
The severe decrease in demand also meant that enterprises cut back on buying activities and inventories, as more firms predict production levels to fall further over the upcoming year, economics associate director Annabel Fiddes at S&P Global, commented on Taiwan’s output outlook.
The final au Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) cut down to 51.5 in August since 52.1 in the prior month, marking the feeblest growth rate from September 2021.
The South Korean PMI dropped to 47.6 in August after 49.8 in July, staying below the 50-point mark for a second month, and reaching its lowest level since July 2020.
After reaching 44.6 in July, Taiwan’s PMI dropped to 42.7 in August.
As a result of declining demand, pricing pressures are also decreasing. The slowest increase in input prices for South Korean manufacturers was observed in August.
Due to declining prices for some raw materials, such as steel and oil, Taiwanese manufacturers saw a decrease in their average input costs for the first time in May 2020.
The country’s PMI stated that India’s manufacturing activity maintained its strong growth in August, in part due to an increase in production from decreasing input cost inflation.
The PMIs showed that Southeast Asia maintained a bright area in the region, with manufacturing output growth accelerating in Indonesia, the Philippines, and Thailand while slowing marginally in Malaysia.