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 a decade, surveys showed.
A series of manufacturing surveys released on Monday suggest any rebound in businesses will be some time off, even though China’s factory activity unexpectedly returned to growth in May.
The new coronavirus pandemic – which has killed more than 370,000 people around the world – has wreaked havoc with supply chains and quashed demand as government-imposed lockdowns forced businesses to close and citizens to stay home.
China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) hit 50.7 last month, marking the highest reading since January as easing of lockdowns allowed companies to get back to work and clear outstanding orders.
But with many of China’s trading partners still restricted, its new export orders remained in contraction, the private business survey showed on Monday.
China’s official PMI survey on Sunday showed the recovery in the world’s second-largest economy intact but fragile.
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 a decade.
“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,” it said.
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.
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 over 5.5 million people globally, equity markets are rallying on hopes for a swift return to health and prosperity.
But the trough in global economic activity will be deeper and the rebound is likely to take longer than previously predicted as the pandemic spreads in waves.