TOKYO: Asian factories struggled to gain momentum in July as China’s strict COVID restrictions and lower global demand slowed production, although early signs of red inflation could peak provided some optimism to price-pressed companies.

A series of Purchasing Managers’ Indexes (PMIs) for July released on Monday showed a drop in new orders in the region’s manufacturing powerhouses, particularly tech giants in Northeast Asia.

South Korea’s factory activity fell for the first time in nearly two years, while Japan saw its slowest activity growth in 10 months amid continued supply chain disruptions. supply.

Growth in activity in China has also slowed, the private sector Caixin PMI showed on Monday, despite some easing of strict national COVID-19 restrictions that hit the world’s second-largest economy in the second quarter.

The Caixin PMI followed an even bleaker reading from the official government PMI released on Sunday, which showed an unexpected drop in activity in July amid fresh COVID-19 outbreaks.

PMIs from Asia’s largest manufacturing economies highlighted the struggle of factories there to cope with the twin pressures of higher upstream prices and weakening demand, especially from China.

“Rising input prices, including fuel, metals and semiconductors, mean that the disruption has been widespread in the (South Korean) manufacturing sector,” said Usamah Bhatti, economist at S&P Global Market Intelligence. , about the South Korean PMI. “That said, the rate of input price inflation declined to a four-month low, a tentative sign that pricing pressures had peaked, although cost inflation remained well above average. long-term.”

Adding to the gloom, the PMI of Taiwan, a semiconductor manufacturing powerhouse, showed factory activity falling at its fastest pace since May 2020.

SILVER LINING?
There was some positive news for the region, however, with PMIs pointing to slower input price growth in China, Taiwan and South Korea.

A spike in global commodity prices amid supply chain disruptions caused by the pandemic and war in Ukraine has become a nightmare scenario for businesses and policymakers around the world, with central banks rushing to tighten the monetary policy and companies cutting costs.

South Korea’s exports rose at a faster annual rate in July, as strong demand from the United States offset weak sales to China, according to separate trade data released on Monday.

Conditions in parts of Southeast Asia were also positive, with PMIs pointing to renewed activity growth in Indonesia, Malaysia and Thailand, where new order growth resisted declines. observed elsewhere in the region.

The readings from Asia come ahead of factory surveys expected in the UK, eurozone and US later today, which are expected to show similarly mixed conditions in the world’s major industrialized economies.