Asian factory activities are hit by rising costs, Delta variant Reuters

By Leika Kihara

TOKYO (Reuters)-Asian factories encountered difficulties in July due to rising input costs and a new wave of coronavirus infections that have caused strong global demand, highlighting the fragility of the region’s recovery.

Manufacturing activities in major exporting countries Japan and South Korea increased, but companies suffered from supply chain disruptions and shortages of raw materials, which pushed up costs.

A private survey showed that due to the first contraction in demand in more than a year, China’s factory activity growth in July fell sharply, basically in line with the slowdown in the official survey released on Saturday.

According to private investigations, factory activity in Indonesia, Vietnam, and Malaysia shrank in July due to rising infection rates and stricter COVID-19 restrictions.

The survey highlighted the divergence in the speed of the global economy recovering from the pressures caused by the pandemic, which led the International Monetary Fund to lower its growth forecast for emerging Asia this year.

IHS Markit economist Usamah Bhatti said: “Anecdotal evidence shows that COVID-19 cases across Asia have returned and continued supply chain disruptions have slowed domestic and international market demand.”

China’s Caixin/Markit Manufacturing Purchasing Managers Index (PMI) fell from 51.3 in June to 50.3 in July, the lowest level in 15 months, as rising costs cast a shadow on the prospects of the world’s manufacturing center.

In the end, the au Jibun Japan PMI index rose from 52.4 in the previous month to 53.0 in July, but manufacturers’ input prices rose the fastest since 2008.

Japan is also facing a surge in delta cases, forcing the government to extend emergency restrictions to a wider area until August 31, casting a shadow over the Olympics and dashing hopes of a sharp rebound in economic growth from July to September .

South Korea’s July PMI was 53.0, staying above 50, indicating that activities have expanded for the 10th consecutive month. However, the sub-index of input prices rose to the second highest level on record, indicating that companies are under pressure from rising raw material costs.

Indonesia’s July PMI plummeted from 53.5 in June to 40.1, highlighting the pressure of the pandemic on emerging Asia.

The July PMI survey showed that manufacturing activities in Vietnam and Malaysia also shrank.

Emerging Asian economies were once seen as a driving force for global growth, but lagging behind advanced economies in recovering from the pandemic pain, because the delay in vaccine launch hurts domestic demand and countries that rely on tourism.