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

TOKYO (Reuters) – Asia’s manufacturing activity was lackluster in September as signs of slowing Chinese growth and factory closures caused by the coronavirus pandemic weighed on the region’s economies, said showed Friday surveys.

Plant 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 one region’s woes who is still struggling to get rid of the pandemic blow.

China’s declining economic momentum has dealt a further blow, with the official purchasing managers index (PMI) showing on Thursday that activity at the country’s factories unexpectedly declined in September due to the reduction more significant electricity consumption.

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

“While the coronavirus restrictions on economic activity can be gradually lifted, the slowness at which this will occur means that the economies of Southeast Asia will stagnate for the rest of the year,” Makoto Saito said, 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.

“The disruption in the supply chain has continued to dampen activity and demand,” said Usamah Bhatti, economist at IHS Markit, of the Japan PMI survey.

South Korea’s PMI for September rose to 52.4 from 51.2 in August, remaining above the 50-point threshold which indicates an expansion in activity for the 12th consecutive month.

But continued supply chain disruptions have shaken manufacturers’ business optimism.

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.

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.