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SYDNEY (Reuters) – Asia’s factory activity devastated in April, business surveys showed on Monday, and prospects dimmed further as government restrictions on movements to contain the coronavirus outbreak froze the world production and reduced demand.
FILE PHOTO: Employees work on a production line that manufactures metal parts for furniture at a factory in Hangzhou, Zhejiang Province, China, April 30, 2020. China Daily via REUTERS
A series of IHS Markit Purchasing Manager Indices (PMIs) have fallen more sharply since March, with some falling to record lows and others reaching levels last seen during the 2008 global financial crisis- 2009.
Similar indicators coming out of Europe on Monday and later in the week are also expected to show industry conditions hovering at record lows, reinforcing the International Monetary Fund’s warning that the world economy is headed for its biggest decline. since the 1930s.
South Korea’s PMI, Asia’s fourth largest economy and a world manufacturing power, fell to 41.6 in April, the lowest reading since January 2009. Japan’s PMI released last week fell sharply. similar to a minimum of 11 years.
“The bad news is that the success of the industry in many places is unlikely to be past the worst,” wrote Alex Holmes, Asia economist at Capital Economics, in a note.
“Global demand has plummeted and we don’t think it has bottomed yet. The latest incoming data for the US and Western Europe point to an unprecedented drop in demand. And although the Chinese economy has started to recover, the demand there is still very weak. ”
Last week, China’s official PMI showed factory activity continued to grow in April, albeit more slowly than in March, while the private-sector PMI Caixin showed a decline in contraction, albeit at a much smoother pace. than the rest of the world. Significantly, exporters in both surveys were rocked by sharp declines in orders.
While China appears to be ahead of others in emerging from the economic paralysis caused by the pandemic, any recovery is expected to be gradual and unlikely to trigger an immediate resurgence in global demand.
The PMI for Taiwan, one of the main producers of high-end technology components, fell to 42.2, its lowest level since 2009 and below 50.4 in March.
Declines in PMIs in South Korea and Taiwan showed contractions that were less severe than those seen in other economies in the region, with indicators in India, Malaysia, Indonesia and Vietnam reporting falls to all-time lows.
In India, Asia’s third largest economy, new orders and production fell at the fastest pace since early 2005, and factories cut jobs at the fastest rate in the history of the survey.
Holmes of Capital Economics said that while South Korea and Taiwan held up better than other Asian peers, thanks mainly to effective government policies to contain the virus, conditions have worsened.
Official data released last week showed that the coronavirus sent South Korean exports plummeting in April at their fastest pace since the global financial crisis.
South Korean tech giant Samsung Electronics Co Ltd said last week that it expected earnings to decline in the current quarter due to a drop in sales.
He said that while home work orders and growth in online learning would underpin demand for memory chips, the outlook for smartphones and TVs was bleak as consumers deferred discretionary spending.
The drop in output is of particular concern to policy makers, who are concerned about the socially destabilizing effects of mass unemployment as companies in the factory and service sectors reduce the workforce.
A private sector survey conducted in Australia on Monday showed that job ads fell a record 53.1% in April, a decrease that was almost five times greater than the previous record of 11.3% in January 2009.
Reports from Joori Roh at SEOUL, Ben Blanchard at Taipei, Khanh Vu at HANOI, Joseph Sipalan at KUALA LUMPUR, Wayne Cole at SYDNEY; Written by Sam Holmes; Editing by Shri Navaratnam
