Slumping output highlights darkening economic outlook for Asia in 2023 as China’s lockdowns upend supply chains.
Factory output slumped widely across Asia in November as slowing global demand and uncertainty over the fallout from China’s strict COVID-19 lockdowns weighed on business sentiment.
The results highlight Asia’s darkening economic outlook for 2023, as the lockdowns disrupt international supply and heighten fears of a further slump in its economy, the world’s second-largest.
Amid the pandemic curbs, China’s factory activity shrank in November, a private survey showed on Thursday. The result implied weaker employment and economic growth in the fourth quarter.
Manufacturing activity also contracted in export-reliant economies, including Japan and South Korea, and in emerging nations, such as Vietnam, underscoring widening damage from weak global demand and stubbornly high input costs, surveys showed.
“Cooling market conditions, sustained cost pressures and weak underlying demand, both domestically and internationally, were reportedly pivotal factors contributing to the declines,” said economist Laura Denman at S&P Global Market Intelligence, which compiles the survey on Japan.
China’s Caixin/S&P Global manufacturing purchasing managers’ index (PMI) stood at 49.4 in November, up from 49.2 in the previous month but still below the 50 mark, which separates growth from contraction. It has now been below 50 for four consecutive months.
Japan’s au Jibun Bank PMI also fell, to 49.0 in November from October’s 50.7. That was the first contraction since November 2020.
South Korea’s factory activity shrank for a fifth straight month in November but the downturn moderated slightly, possibly suggesting the worst was over for businesses.
Still, South Korea’s exports in November suffered their steepest annual drop in two and a half years, separate data showed on Thursday, hit by cooling global demand in major markets led by China and a downturn in the semiconductor industry.
Lockdowns in China have hit production at a factory there that is the biggest producer of Apple. They have also stoked rare street protests across many cities.
The effect of China’s woes was felt widely across Asia. Taiwan’s PMI stood at 41.6 in November, up slightly from 41.5 in October but remaining far below the 50 mark.
Vietnam’s PMI fell to 47.4 in November from 50.6 in October, while that for Indonesia slid to 50.3 from 51.8, the private surveys showed.