Asia manufacturing slowdown in March points to recession

SINGAPORE (ICIS)–Asia’s factories look set to battle a global recession this year following the sharp contraction in the region’s manufacturing economy in March as overseas demand and domestic spending plummeted in the wake of the coronavirus pandemic.

The latest set of manufacturing purchasing managers’ indices from Japan, India, South Korea, Indonesia, Malaysia, Philippines, Vietnam and Thailand all point towards recession.

South Korea’s PMI fell from 48.7 in February to 44.2 in March, the worst in 11 years, while those for Thailand, Vietnam and the Philippines point to a sharp contraction in factory output.

Regional economic bellwether China showed improvements in March but is set to face massive headwinds amid a deteriorating external environment, with growth stagnating or contracting in the US, Japan and Europe.

At 44.5 points in March, the Eurozone Manufacturing purchasing managers’ index (PMI) fell from February’s 49.2 points; a reading below 50.0 points shows economic contraction.

China’s official manufacturing purchasing managers’ index (PMI) for March rose to 52.0 – the highest reading since September 2017 – from a record low of 35.7 in February 2020.

A PMI figure above 50 indicates an expansion in the manufacturing sector.

Caixin’s general manufacturing PMI published on 1 April rose from a record low of 40.3 in February to 50.1 in March.

Business conditions in the Indian manufacturing sector improved at the slowest rate in four months in March, with new export orders declining at a record pace as international demand faltered, financial information services provider IHS Markit said on 2 April.

At 51.8 in March, the IHS Markit India manufacturing PMI fell from 54.5 in February to 51.8 in March.

“Should the trajectory of injections continue in the same vein, the Indian manufacturing sector can expect a much sharper negative impact in the coming months, similar to the scale seen in other countries,” said Eliot Kerr, an economist at IHS Markit.

The firm’s manufacturing PMI for Singapore released on Friday posted a historical low of 33.3 in March, down from 47.0 in February.

The March reading of the PMI’s output index is consistent with GDP falling at an annualised rate of nearly 30% over a quarter, which makes it by far one of the worst-hit countries in Asia, it said.

SHARP ECONOMIC DOWNTURN TO HAMPER ASIA FACTORIES
Regional economic growth in developing Asia will decline sharply in 2020 due to the effects of the pandemic, before recovering in 2021, the Asian Development Bank warned in a report on Friday.

The ADB report forecasts regional growth of 2.2% in 2020, a downward revision of 3.3 percentage points relative to the 5.5% ADB had forecast in September 2019.

Growth is expected to rebound to 6.2% in 2021, assuming that the outbreak ends and activity normalizes.

The global cost of the pandemic could range from $2.0tr to $4.1tr , equivalent to a loss of between 2.3% to 4.8% of global GDP, the ADB said.

The slowdown reflects the now-global nature of the pandemic, the extensive use of containment policies and travel bans worldwide, and data on how the outbreak affected activity in China.

The coronavirus has infected more than 1 million people worldwide as of Friday, based on the latest data from Johns Hopkins University (JHU).

Focus article and interactive by Nurluqman Suratman

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