GLOBAL ECONOMY – Asian factories stagnate as China’s slowdown and supply constraints kick in

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Band Leika Kihara

TOKYO, October 1 (Reuters)Asia’s manufacturing activity broadly stagnated in September as pandemic-induced factory closures and signs of slowing Chinese growth weighed on the region’s economies, surveys showed Friday.

Countries where large Delta variant outbreaks have receded have seen an improvement in activity, such as Indonesia and India.

But factory activity in September declined in Malaysia and Vietnam, and increased in Japan at the slowest pace in seven months, as chip shortages and supply disruptions added to the woes of a region still struggling to get rid of the COVID-19 coup.

China’s declining economic momentum has dealt a further blow to the region’s growth prospects, with the official purchasing managers index (PMI) showing on Thursday that the country’s factory activity has contracted significantly. unexpectedly in September due to more severe restrictions in electricity consumption.

While the Caixin / Markit private manufacturing PMI index performed better than expected after the fall in August, growing signs of weakness in the world’s second largest economyD cloud the outlook for neighboring Asian countries.

“While coronavirus restrictions on economic activity may be gradually lifted, the slowness at which this will occur means Southeast Asian economies will stagnate for the remainder of this year,” said Makoto Saito, economist at the NLI Research Institute.

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

Manufacturers in the world’s third-largest economy have come under pressure from pandemic restrictions and increased supply chain disruptions as well as raw material shortages and delivery delays.

South Korea’s PMI for September rose to 52.4 from 51.2 in August, helped by an expansion in production and new orders.

It remained above the 50-point threshold that indicates an expansion in business for a 12th consecutive month, but continued supply chain disruptions have shaken manufacturers’ business optimism.

Taiwan factories continued to expand, but at their slowest pace in over a year.

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

In a glimmer of hope, Indonesia’s PMI rose to 52.2 from 43.7 in August, while India’s improved to 53.7 in September from 52.3 in August. last month.

“While regional PMIs have shown that the disruption caused by large waves of viruses in the region is easing somewhat, unfulfilled orders continue to pile up, meaning that the resulting shortages further into the supply chains are expected to persist for some time, ”said Alex Holmes, emerging Asia economist at Capital Economics.

Once seen as an engine of global growth, emerging economies in Asia are lagging behind advanced economies in recovering from the pain of the pandemic as delays in vaccine deployment and a spike in Delta variant cases hamper for consumption and factory production.

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

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