SINGAPORE (ICIS)--Manufacturing activities in southeast Asia continue to be battered by lockdown measures as the region battles surging COVID-19 caseloads.
Restrictions have started to be lifted in September in some countries but slow vaccine rollouts remain a major problem.
"The spread of the delta variant amid still-low vaccination rates in many ASEAN economies and China’s zero-tolerance COVID-19 strategy has prompted governments to impose restrictions and order factory/port closures," Nomura Global Markets said in a research note.
"As a result, raw materials shortages, port congestion and unavailability of containers have lengthened lead times, at a time when chip inventories are already running low," it said.
The ASEAN purchasing managers’ index (PMI) remained in contraction mode for the third month in a row, with August reading at 44.5, based on a private survey of financial services provider IHS Markit.
For the first time since May 2020, all seven countries in the region tracked by IHS Markit recorded PMI readings below 50, the threshold for expansion.
|China (Caixin/IHS Markit)||49.2||50.3||lower|
|Japan (Jibun Bank/IHS Markit)||52.7||53||lower|
|South Korea (IHS Markit)||53||51.2||lower|
|Taiwan (IHS Markit)||58.5||59.7||lower|
|Indonesia (IHS Markit)||43.7||40.1||higher|
|Thailand (IHS Markit)||48.3||48.7||lower|
|Malaysia (IHS Markit)||43.3||40.1||higher|
|Vietnam (IHS Markit)||40.2||45.1||lower|
|Philippines (IHS Markit)||50.4||46.4||lower|
|Singapore (IHS Markit)||44.3||45.6||lower|
Output and new orders in southeast Asia's factory sector fell for the third straight month, reflecting ongoing challenges posed by the reintroduction of stricter containment measures.
Foreign demand also weakened during August, as new export orders across the region decreased for the third month in a row and markedly, IHS Markit said.
Vietnam's PMI reading in August was the lowest since April 2020 as factories were forced to suspend production due to staff shortages.
"Vietnamese manufacturers are facing a near-impossible task at present as the restrictions put in place to try and contain the spread of the COVID-19 outbreak in the country constrain their ability to produce goods," IHS Markit economics director Andrew Harket said.
"Some are closed outright, with others operating at reduced capacity and with scaled down staff members - a number of firms indicated that they had implemented the '3 in one spot' policy to keep some staff presence on site," he said.
Vietnam has allowed factories to continue their operations if they can provide on-site accommodation - dubbed as the “3 in one spot” policy - or provide transport to ensure they go directly to the accommodation arranged for them after work.
In Indonesia, ongoing COVID-19 disruptions weighed on its manufacturing sector for a second consecutive month in August.
Easing of restrictions took effect on 24 August and will last up to 6 September on several populous areas in the country, including the capital Jakarta, as infection levels have dropped significantly since peaking in mid-July.
With the lifting of restrictions, factories that were affected are now able to operate with 100% workers split into shifts.
Indonesia has the highest number of COVID-19 cases and deaths in southeast Asia with around 4.1m cases and 133,000 fatalities.
However, as the second wave on infections had peaked, the deterioration in production and demand eased from the severe rates seen in July.
Thailand on 1 September eased pandemic-related restrictions in the capital Bangkok and 28 provinces as the number of infections fell from mid-August peak.
The restrictions imposed had weighed heavily on petrochemical downstream sectors as consumption waned and factories had to restrict operations.
The country reported around 14,800 new COVID-19 cases on 1 September, down by around 40% from mid-August, bringing its total caseload to around 1.2m with close to 12,000 deaths.
The highly infectious Delta variant of the novel coronavirus poses a strong downside risk for the whole of Asia.
In China, the world’s second-biggest economy and Asia’s biggest, factory output growth has been slowing down for the past five months, based on official data, while a private survey by media group Caixin indicated a manufacturing downturn in August.
China's key manufacturing PMI fell to 18-month low in August as the country also had its recent bout of infections that prompted tightening of restrictions.
Asia is once again the epicentre of the pandemic, with countries like Indonesia, Philippines, Thailand and Malaysia facing severe domestic health crises, Fitch Solutions said in a report on 27 August.
"Continued outbreak risks will hold back the possibility of Asian economies normalising activity and re-opening their markets in a meaningful way in 2021," it said.
Focus article by Nurluqman Suratman
Photo: A healthcare worker prepares a dose of COVID-19 vaccine during a vaccination drive in Depok, Indonesia, 01 September 2021. (By MAST IRHAM/EPA-EFE/Shutterstock)
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