Asia’s fac­tory ac­tiv­ity plunges as coro­n­avirus shock deep­ens

China’s pri­vate sur­vey shows im­prove­ment in fac­tory ac­tiv­ity

Kuwait Times - - Business -

TOKYO: Fac­tory ac­tiv­ity con­tracted sharply across most of Asia in March as the coro­n­avirus pan­demic par­a­lyzed eco­nomic ac­tiv­ity across the globe, with sharp falls in ex­port power-houses Ja­pan and South Korea over­shad­ow­ing a mod­est im­prove­ment in China.

Man­u­fac­tur­ing gauges also tum­bled in In­done­sia, Viet­nam and the Philip­pines, Pur­chas­ing Man­agers’ In­dex (PMI) sur­veys showed yes­ter­day, 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.

While fac­to­ries in China grad­u­ally restarted op­er­a­tions af­ter lengthy shut­downs and a fall in virus cases al­lowed the coun­try to start re­lax­ing travel re­stric­tions, ac­tiv­ity in South Korea 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. “(Pol­i­cy­mak­ers) have to ac­cept the in­evitable that there is a mas­sive global pan­demic here, there is an out­break in almost ev­ery coun­try glob­ally and cer­tainly in our re­gion, which is get­ting to lev­els that if they don’t take very dra­matic ac­tion, it’s go­ing to get much worse,” he said.

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. A sep­a­rate “tankan” sur­vey by the Bank of Ja­pan showed yes­ter­day that busi­ness sen­ti­ment soured to a seven-year low in the three months to March, as the out­break hit sec­tors from ho­tels to car­mak­ers.

“The tankan clearly shows a sharp de­te­ri­o­ra­tion in busi­ness sen­ti­ment and con­firms the econ­omy is al­ready in re­ces­sion,” said Ya­sunari Ueno, chief mar­ket econ­o­mist at Mizuho Se­cu­ri­ties. 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 con­sul­tancy ex­pects global gross do­mes­tic prod­uct (GDP) to fall by more than 3 per­cent this year.

Pol­i­cy­mak­ers across the globe, in­clud­ing in Asia, have an­nounced mas­sive mon­e­tary and fis­cal stim­u­lus mea­sures to try to mit­i­gate the eco­nomic fall­out from the pan­demic, keep cash-starved busi­nesses afloat and save jobs. But many mea­sures have been short-gap steps to deal with the im­me­di­ate dam­age to cor­po­rate fund­ing and shore up bank­ing sys­tems amid wor­ries of a credit cri­sis.

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. — Reuters


WUHAN: Em­ploy­ees wear­ing face masks work­ing on an assembly line at an auto plant of Dongfeng Honda in Wuhan in China’s cen­tral Hubei prov­ince.

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