Asia’s factory pain deepened in May as the slump in global trade caused by the coronavirus pandemic worsened, with export powerhouses Japan and South Korea suffering the sharpest declines in business activity in more than 10 years.
A series of manufacturing surveys released on Monday suggests any rebound in businesses will be some time off, even though China’s factory activity unexpectedly returned to growth in May.
China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) – a survey of export-oriented private firms – hit 50.7 last month, marking the highest reading since January as an easing of lockdowns allowed companies to get back to work and clear outstanding orders. The 50 mark separates growth from contraction in activity.
But with many of China’s trading partners still restricted, its new export orders continued to shrink, the private business survey showed on Monday. China’s official PMI survey released on Sunday – which is weighted towards larger government-linked firms – showed the recovery in the world’s second-biggest economy is intact but fragile.
“Global demand is weak, as demonstrated by high unemployment levels in the [United States], [United Kingdom] and European economies, even as lockdowns are relaxed in some major cities,” Iris Pang, chief economist for Greater China at Dutch bank ING, wrote in a research note sent to Al Jazeera.
“Even with some reopening, the jobs markets in these countries are unlikely to be able to digest all of these unemployed in a short time period. This could take a long time to improve,” Pang wrote.
Japan’s factory activity shrank at the fastest pace since 2009 in May, a separate private-sector survey showed while South Korea also saw manufacturing slump at the sharpest pace in more than 10 years.
Capital Economics said the region’s manufacturing sector is in a deep recession.
“Industry is likely to have seen an initial jump from the easing of lockdown restrictions. And things are likely to continue improving very gradually over the coming months as external demand recovers,” Capital Economics wrote. “But output is still likely to be well below normal levels for many months to come as domestic and global demand remain very depressed.”
Taiwan’s manufacturing activity also fell in May. Vietnam, Malaysia and the Philippines saw PMIs rebound from April, though the indices all remained below the 50-mark threshold that separates contraction from expansion.
Official data on Monday showed South Korea extending its exports plunge for a third straight month.
India’s factory activity contracted sharply in May, extending the major decline seen in April as a government-imposed lockdown hammered demand.
Asia’s economic woes are likely to be echoed in other parts of the world including Europe, where economies continue to suffer huge damage in factory and service sectors.
With many countries starting to ease lockdown restrictions imposed to stop the spread of the virus, which has infected more than 5.5 million people globally, equity markets are rallying on hopes for a swift return to health and prosperity.
A deeper trough
But the trough in global economic activity could be deeper and the rebound is likely to take longer than previously predicted as the pandemic spreads in waves, analysts and investors say.
The International Monetary Fund warned last month the global economy will take much longer than expected to recover fully from the virus shock, suggesting a downgrade to its current projection for a 3 percent contraction this year.
A US-China row over Hong Kong’s semi-autonomous status and Beijing’s handling of the pandemic could sour business sentiment and add to already huge strains on the global economy.
The final au Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) fell to a seasonally adjusted 38.4 from 41.9 in April, its lowest since March 2009.
South Korea’s IHS Markit purchasing managers’ index (PMI) edged down to 41.3 in May, the lowest since January 2009 and below 41.6 in April.