Asia factory activity slumps to record lows amid global lockdowns

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SINGAPORE – Factory output across several Asian countries slumped to record lows in April, signaling a deeper contraction in the world’s manufacturing hub even as China begins restarting some operations.

Purchasing managers indexes (PMIs) across South-east Asia slumped further below 50, the dividing line between contraction and expansion, to post their weakest readings since the series began, according to data released by IHS Markit on Monday (May 4). India’s PMI, too, dropped to a record low as output crashed amid a 40-day lockdown.

Taiwan, Japan and South Korea dropped to their lowest levels since 2009.

The factory data were another reminder that the global economic recovery from the biggest crisis since the Great Depression likely will be long and uneven. While China has started reopening factories and is ramping up infrastructure spending to support the domestic economy, the and global pain will probably persist for some time.

China PMI data released last week showed the official manufacturing purchasing managers’ index slipped to 50.8 from 52 a month earlier. The separate Caixin gauge, more focused on smaller export-orientated firms, returned to contraction.

The slump in South Korea, a bellwether of global trade, shows that even as China re-emerges from its lockdown, it isn’t yet offering enough demand to jumpstart output, according to IHS.

“Although China, South Korea’s biggest export market, appears to be slowly re-opening for business, it’s clear this will be far from sufficient to offset the severe weakness elsewhere,” Joe Hayes, an economist at IHS Markit wrote in a release.

The PMI follows official data that showed South Korea’s exports fell in April by the most since the global financial crisis. The value of overseas shipments dropped 24% from a year earlier led by sharp falls in exports of ship, cars and auto parts, semiconductors and oil products.

Chang Shu, chief Asia economist for Bloomberg, said: “While the coming months remain challenging, the region may slowly start to improve in May as economies in and out of Asia start to lift virus-induced lockdowns. We expect more policy easing to come.”

Indonesia’s PMI plummeted to 27.5 in April from 45.3 in March, Malaysia’s dropped to 31.3 and Vietnam fell to 32.7.

“The data confirm our earlier view that even when some Asian economies’ domestic demand is starting to recover gradually as social distancing measures are being lifted, recessionary conditions in most advanced economies will make their recovery dynamics very challenging because of weak export sector prospects,” said Tuuli McCully, the Singapore-based head of Asia economics at Scotiabank.

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