How coronavirus has affected Asia’s factories?

12 Apr, 2020 15:36
source: Singularity Financial

Singularity Financial Hong Kong April 12, 2020 – by Zohar Keen

The coronavirus pandemic forced lockdowns across Asia over February and March, paralyzing economic activity across the continent as factories shut bringing manufacturing to a halt. Sharp falls in export power-houses Japan and South Korea are overshadowing a modest improvement in China.

Japan’s factory activity contracted at the fastest pace in about a decade in March, adding to views that the world’s third-largest economy is likely already in recession. Activity in South Korea also shrank at its fastest pace in 11 years as many of its trading partners imposed dramatic measures to curb the virus’ spread.

“If you look at the Korean numbers, they’re fairly bad … They’re likely to get worse still because Korea will be dependent on parts from Europe and the United States,” said Rob Carnell, Asia-Pacific chief economist at ING in Singapore.

Manufacturing gauges also tumbled in Indonesia, Vietnam and the Philippines, Purchasing Managers’ Index (PMI) surveys showed on Wednesday, underscoring the widening damage brought by the pandemic that has infected more than 700,000 people, upended supply chains and led to city lockdowns worldwide.

China’s factory activity improved slightly more than expected in March after plunging a month earlier, a private business survey showed, but growth was marginal, highlighting the intense pressure facing businesses as domestic and export demand slumps.

PMIs in the region are their lowest since 2009

China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 50.1 last month, from February’s record low of 40.3, and just a notch above the 50-mark that separates growth from contraction.

South Korea’s IHS Markit PMI plunged to 44.2, its lowest since January 2009 when the economy was reeling from the global financial crisis. The index was 48.7 in February.

Japan’s PMI fell to a seasonally adjusted 44.8 from a reading of 47.8 in February, its lowest since April 2009. The ruling coalition has called on the government to secure a stimulus package worth at least 60 trillion yen ($553 billion), with 20 trillion yen in direct spending.

“Things are likely to get a lot worse in the months ahead,” Alex Holmes at Capital Economics said in a note to clients, nothing the survey period for the PMIs likely didn’t capture more recent lockdowns such as those in Malaysia and Thailand.

The International Monetary Fund has said the pandemic was already driving the global economy into recession, calling on countries to respond with “very massive” spending to avoid bankruptcies and emerging market debt defaults.