Asian factories defy China slowdown as Euro area loses momentum

China remains a significant risk as lockdowns threaten to choke off manufacturing logistics and restrain trade. PHOTO: AFP

SYDNEY (BLOOMBERG) - Asia's factories did a better job in the past month than their European counterparts of weathering the impact on global supply chains of China's lockdowns and the conflict in Ukraine.

Manufacturing hub South Korea's Purchasing Managers' Index (PMI) climbed to 52.1 in April, according to S&P Global, recovering some ground lost in March.

The Philippines, Myanmar and Australia all advanced too, while only Taiwan proved an outlier.

By contrast, the equivalent measure in the euro area was at a 15-month low.

"It will be important to see how growth momentum is sustained amid ongoing supply-chain disruption and sharply rising costs," said S&P Global economist Maryam Baluch.

China remains a significant risk as the latest surge in Covid-19 cases and subsequent lockdowns threaten to choke off manufacturing logistics and restrain trade.

In the euro area, a measure of factory activity was revised up slightly to 55.5 but still confirmed to be slowing as shortages of components were aggravated by the Chinese outbreak and the war in Ukraine.

Rising prices and uncertainty about the economic outlook also weighed on demand in the currency bloc, with growth in new orders slowing sharply.

The region's manufacturing sector "looks set for a difficult period of falling production and surging prices," said S&P Global economist Chris Williamson.

Asia-Pacific economies, which include some of the world's top exporters, largely held up through April.

The impact from weaker activity in China - the top trading partner for much of the region - was offset by renewed demand in other key markets such as the United States.

The Philippines recorded its best performance since November 2017 as output and new orders surged.

Only Taiwan fell - reflecting its deep economic links to China - with its lowest reading since July 2020.

In South Korea meanwhile, price and supply pressures were exacerbated by Russia's war on Ukraine and China's expanding Covid-19 restrictions.

The April PMI releases are scattered across several days given holidays across the region, including Idul Fitri in South-east Asia's biggest economy, Indonesia.

Thailand's PMI is set for release on Tuesday, with Vietnam and Indonesia following on Wednesday and Malaysia's due on Thursday.

The fallout from China's latest Covid-19 struggles was evident in the nation's manufacturing data, with a gauge of factory activity plunging to the lowest level in more than two years in April, data released over the weekend showed.

"Taiwan's manufacturing sector performance weakened in April as the recent increase in Covid-19 cases and lockdowns in mainland China impacted supply and demand," said S&P Global economics associate director Annabel Fiddes.

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