SINGAPORE (ICIS)--Asia's manufacturing sector outside of China remained in contraction mode in May despite re-opening of more economies from coronavirus-related lockdowns, with expectations that production will outpace demand in the near term.
"Economies [Asian] that were in stringent lockdowns in April are witnessing higher activity in May, but the pace of their recoveries is more gradual than China’s V-shaped pickup in March," Japan's Nomura Global Markets Research said.
Malaysia, the Philippines and Thailand – which were under stringent lockdowns in April – showed improvement in their purchasing managers’ index (PMI) numbers in May but remained below 50, indicating continued contraction.
On average, the PMIs for the three countries improved to 42.5 in May from 33.2 in April.
"ASEAN manufacturing sector performance remained weak during May, with operating conditions deteriorating at the second-quickest rate since the series began in July 2012 as the COVID-19 [coronavirus disease 2019] pandemic continued to negatively impact the sector," said Lewis Cooper, economist at data analytics firm IHS Markit.
While data appear to suggest that the manufacturing downturn bottomed out in April, ASEAN manufacturers "are still a long way from recovery", Cooper said.
The pace of pick-up in activity for the rest of Asia appears to be more gradual in contrast to China’s sharp rebound in March from a record low in February, when the country placed various cities under lockdown to contain the novel coronavirus outbreak.
China's official manufacturing purchasing managers' index (PMI) slipped in May but remained in expansionary mode.
A PMI reading above 50 marks expansion in the manufacturing economy while a reading below 50 indicates contraction.
Chinese private media group Caixin also had an expansionary reading for China’s May manufacturing PMI at 50.7, up from 49.4 in April. Higher readings were recorded for both new orders and new export orders sub-indices in May, but they remained below 50.
The continued weakness in new export order signals an impending sharp contraction in exports from the global coronavirus pandemic, Nomura said.
In India, manufacturing PMI improved to 30.8 in May from 27.4 in April, according to IHS Markit, as some restrictions were eased even though the nationwide lockdown remained in place.
Domestic manufacturers remained optimistic of the business outlook for the whole year, largely expecting a return to growth once all coronavirus-related restrictions are lifted, it said.
In South Korea, the manufacturing PMI dipped to 41.3 in May, while Taiwan’s manufacturing PMI eased to 41.9, signaling that weak demand from the coronavirus pandemic "could continue to linger", UOB Global Economics & Markets Research said.
South Korea, which successfully flattened its coronavirus infection curve, remain in the contraction zone due to weak export demand and weak employment.
On average, the output index for countries across Asia improved by much more than the rise in new orders index, according to Nomura.
Export orders in Asia remained deep in the contraction zone across all countries, although they improved, on average, to 33.6 in May from 26.2 in April, it said.
However, export orders fell in Taiwan suggesting weak foreign demand will remain a near-term challenge, Nomura said.
Focus article and interactive by Nurluqman Suratman
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