Page Nav


Gradient Skin



Responsive Ad

Higher prices and low demand have put pressure on Asia's factories

Image: Reuters Berita 24 English - Asia's factories had trouble getting going in July because China's strict COVID rules and falling...

Image: Reuters

Berita 24 English - Asia's factories had trouble getting going in July because China's strict COVID rules and falling global demand slowed production. However, early signs that red-hot inflation may be reaching its peak gave firms that were being squeezed by prices some reason to be hopeful.

Purchasing managers' indexes (PMI) for July, which were released on Monday, showed that new orders in the region's manufacturing powerhouses, especially the tech giants in northeast Asia, were down.

South Korea's factory activity dropped for the first time in almost two years, and Japan's activity grew at its slowest rate in 10 months because of problems in the supply chain.

The private sector Caixin PMI showed on Monday that activity growth in China also slowed, even though some of the strict domestic COVID-19 curbs that hurt the world's second-largest economy in the second quarter have been eased.

The official PMI from the government, which was released on Sunday, was even worse. It showed that activity unexpectedly dropped in July because of new COVID-19 outbreaks.

The PMIs for Asia's biggest manufacturing economies showed how hard it was for factories in those countries to deal with higher upstream prices and lower demand, especially from China.

Usamah Bhatti, an economist at S&P Global Market Intelligence, said of South Korea's PMI that higher prices for inputs like fuel, metals, and semiconductors caused a lot of trouble in the manufacturing sector. "However, the rate of input price inflation fell to its lowest level in four months, which is a possible sign that price pressures have reached their peak, even though cost inflation remained well above the long-term average."

The PMI for Taiwan, a world leader in making semiconductors, showed that factory activity was falling at its fastest rate since May 2020.


PMIs showed, however, that input price growth was slowing in China, Taiwan, and South Korea, which was good news for the area.

A rise in global commodity prices caused by the pandemic and the war in Ukraine has become a nightmare for businesses and policymakers around the world. Central banks are rushing to tighten monetary policy, and companies are cutting costs.

South Korea's exports grew at a faster annual rate in July because strong sales to the U.S. made up for weak sales to China, according to separate trade data released on Monday.

Conditions were also good in some parts of Southeast Asia. PMIs showed that activity growth was picking up in Indonesia, Malaysia, and Thailand, where new orders were going up even though they were going down in other parts of the region.

The readings from Asia come before factory surveys from the UK, the euro zone, and the US, which will be released later in the day. These surveys are also expected to show mixed conditions in the world's major industrialised economies.

Reponsive Ads