GLOBAL ECONOMY-Global factory growth held back by war, COVID curbs in China

Band Jonathan Cable and Leika Kihara

LONDON/TOKYO, June 1 (Reuters)Global factory activity growth slowed in May as tough coronavirus restrictions in China and Russia’s invasion of Ukraine disrupted supply chains and dampened demand, adding to the woes of companies already struggling with soaring commodity prices.

Manufacturing growth slowed last month in economies as diverse as France, Japan in Malaysia, according to business surveys on Wednesday, illustrating the challenge facing decision makers try fight against inflation without stifling anemic economic activity.

S&P Global’s Final Manufacturing Purchasing Managers’ Index (PMI) for the Eurozone fell to 54.6 in May from 55.5 in April, its lowest since November 2020 although fair ahead of a preliminary reading of 54.4. Anything above 50 indicates growth. EUR/PMIM

In Britain, manufacturing activity grew last month at the weakest pace since January 2021, as producers of consumer goods battle a worsening cost of living crisis.

“Inflation drives up the cost of doing business and dampens some consumer demand,” said Simon Jonsson of KPMG.

“The conflict in Ukraine has caused new and worsening supply shortages, while COVID-19 restrictions in China and border frictions closer to home, also have had a negative impact on manufacturing in the UK.”

China’s Caixin/Markit manufacturing PMI posted a further away contraction there, coming in at 48.1 in May, although a slight improvement from of april 46.0, a private investigation showed. . This was consistent with official data on factory activity released on Tuesday.

As COVID restrictions are rolled back in some cities, suggesting China’s manufacturing recession has bottomed out, analysts don’t expect a quick rebound like early 2020, saying fears of new outbreaks will continue to influence confidence and demand.

“Disruptions to supply chains and distribution of goods may gradually ease with the end of the Shanghai lockdown. But we are not off the hook as China has not completely abandoned its zero-COVID policy “, said Toru Nishihama, chief economist at Dai-ichi Life. Research Institute in Tokyo.

“Rising inflation is forcing some Asian central banks to tighten monetary policy. There is also a risk of market volatility from interest rate hikes in the United States. Given these layers of risk, the Asian economy could remain weak for most of this year.”

SPIN-OFF IN CHINA

Blockages in China have hampered global logistics and supply chains, with Japan and South Korea reporting a sharp drop in production.

Japan’s manufacturing activity grew at the slowest pace in three months in May, and manufacturers reported a further rise in input costs, the PMI survey showed, as the ripple effects of Lockdowns in China and the conflict in Ukraine have put pressure on the economy.

The final PMI at Jibun Bank Japan fell to a seasonally adjusted 53.3 in May from 53.5, marking his slowest pace since February.

In a glimmer of hope, South Korea’s exports grew at a faster pace in May than a month earlier, separate data presented Wednesday, such as an increase in shipments to Europe and the The United States more than offset the fallout from China.

The monthly trade data, the first to be released among major exporting economies, is considered an indicator of global trade.

India’s industrial activity has grown at a pace upper-than expected in May, with resilient demand despite still high inflation.

(Reporting by Jonathan Cable and Leika Kihara; Editing by Kim Coghill and John Stonestreet)

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