Asia’s Factories Falter as Spread of Virus Adds to Headwinds

(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. 

Asian manufacturing gauges stumbled in January, suggesting the U.S.-China trade agreement failed to spur sentiment for an industry now bracing for supply-chain disruptions and a blow to demand from the spread of the coronavirus.

South Korea’s purchasing manager index -- often viewed as a key barometer of global demand -- fell to 49.8 from 50.1 in December. Malaysia’s reading slipped to 48.8 from 50 while Thailand also returned to negative territory.

Vietnam, whose economy has been a rare winner from the trade tensions as supply chains shifted in its favor, saw its PMI slip to 50.6 from 50.8, data from IHS Markit showed Monday.

The China Caixin Media and IHS Markit PMI manufacturing index fell to 51.1 from 51.5. Data on Friday showed the official PMI dropped to 50 in January, underscoring how the nation’s factories were struggling even before the country shut down for the Lunar New Year holidays and the coronavirus outbreak worsened.

There was better news for Taiwan, whose gauge rose to 51.8 from 50.8. India, which is seeking to boost the share of manufacturing to 25% of the economy from less than a fifth currently, saw its gauge rise to the highest since at least 2017 at 55.3 from 52.7. The Jibun Bank PMI gauge for Japan was 48.8.

Struggle Ahead

A new analysis by Bloomberg Economics shows that Asia’s PMIs will likely continue to weaken as the virus has a strong, though brief hit to the region. Smaller open and export-driven economies including South Korea and Singapore will be among those hit hardest.

“In a scenario that the virus is contained within a quarter, China’s 1Q growth may be 1.4 percentage points below the baseline,” Bloomberg Economics’s Chang Shu wrote in an analysis.

To contact the reporter on this story: Enda Curran in hong kong at ecurran8@bloomberg.net

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Nasreen Seria

©2020 Bloomberg L.P.