Factory activity in Asia suffered heavy losses in August due to new cases of Covid-19, reports Reuters. The ongoing pandemic has disrupted supply chains across the region, raising fears that volatile production will add to a number of economic problems caused by declining consumption.
Southeast Asia, which is a cheap manufacturing hub for many global companies, has been particularly hard hit. The decline in factory activity in Vietnam, Indonesia and Malaysia has led to production shutdowns and a deepening crisis.
The pandemic is hitting economic recovery in Asia
The reason: The delta mutation of Covid-19
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China’s factory activity also shrank in August for the first time in nearly a year and a half as new cases of COVID-19, supply difficulties and high raw material prices weighed on production. Export power plants in Japan, South Korea and Taiwan also saw production growth at a much slower pace last month. This is a clear sign of a shortage of chips and the closure of factories in the region, which could further slow the sustainable recovery of the pandemic decline. The costs are getting higher, the shortage is getting bigger.
The problems of production and the overall economic crisis in Asia today contrast with the conditions in Europe, where factories are expected to maintain an ever-increasing rate of expansion. The reason is that the high percentage of people vaccinated (over 80% as of 1 September in the EU) is helping to open up European economies.
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Chinese factories are left without enough workers
Young people do not want to work in factories
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The studies highlight the growing damage caused by the pandemic in Southeast Asia, where growing infections and subsequent measures and lockdowns have affected both the service and manufacturing sectors. The outbreak of the Delta variant of coronavirus in the region has caused serious headaches in the supply chain for the world’s largest manufacturers. Many of them rely on auto parts and semiconductors manufactured in cheap markets such as Thailand, Vietnam and Malaysia.
“If austerity measures related to the blockade continue, Southeast Asia may find it difficult to remain a global manufacturing hub,” said Makoto Saito, an economist at the NLI Research Institute.
China’s Caixin / Markit Manufacturing Purchasing Manager (PMI) index fell to 49.2 in August from 50.3 in July, breaking 50 signs that separate growth from contraction, according to today’s private sector survey.
The result is well below market expectations and shows the fragile nature of China’s recovery, which has helped the global economy emerge from the stagnation caused by the pandemic.
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