Asia’s Factories Remain in Doldrums Even as Lockdowns Ease

(Bloomberg) -- Asia’s factory managers remained downbeat about the world’s trade engines in May, even as battered economies start to re-open across the region.

Purchasing managers indexes for South Korea, Japan and Taiwan fell, according to data released by IHS Markit on Monday. Readings for India, Vietnam, Malaysia, Thailand and the Philippines improved but remained below 50, the dividing line between contraction and expansion.

China PMI data released Sunday showed the official manufacturing purchasing managers’ index declined to a worse-than-expected 50.6. There was better news Monday in the Caixin PMI, an index more focused on smaller export-orientated firms, which rose to 50.7 from 49.4.

The factory data underscore the fragile and uneven recovery expected in Asia as prospects continue to weaken for countries in the northeast.

Northeast Asia “has had more success in containing the virus, which has led to quicker recovery in mobility and bodes well for domestic demand, but they still have to contend with a very weak external environment and a potential downturn in the semiconductor sector,” said Priyanka Kishore, head of India and Southeast Asia economics at Oxford Economics Ltd. in Singapore.

What Bloomberg Economists Say

Many emerging economies showed signs of revival, even as their manufacturing sectors were still contracting.

The process of re-opening will be challenging for economies in the region, especially now with the risk that rising U.S.-China tensions spill into economic policies.

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Chang Shu, chief Asia economist

High-frequency figures recently have shown an uptick in global demand, with risks that the recovery across economies will be uneven without a vaccine for the coronavirus.

Manufacturing gauges are signaling more relief so far than services sectors, with governments only now beginning to ease lockdowns and allow for more mobility of consumers.

India, which started to lift the strictest stay-at-home rules in late April, saw its manufacturing sector recover a bit, though business conditions remained weak and companies cut staff. The manufacturing PMI rose to 30.8 in May from 27.4 in April, but remained well in contraction territory for the second straight month.

In South Korea, a bellwether for global trade, exports posted another double-digit decline in May. Overseas shipments fell 24% from a year earlier, the trade ministry said Monday, compared with economists’ forecast of a 25% contraction.

For now, there appear to be few signs of a turnaround in South Korea’s exports without broader global demand also picking up.

“It seems unlikely that conditions will allow for a robust pick-up in demand any time soon,” IHS Markit economist Joe Hayes said in a statement. “Below-capacity operating rates will also essentially cap potential growth in the near-term.”

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