Asian Factory Activity Stunted By Rising Costs, Delta Variant Spread

Asia's factories hit a rough patch in July as rising input costs and a new wave of coronavirus infections overshadowed solid global demand, highlighting the fragile nature of the region's recovery.

Photo Insert: A garment factory in Southeast Asia

Manufacturing activity rose in export powerhouses Japan and South Korea, though firms suffered from supply chain disruptions and raw material shortages that pushed up costs, Leila Kihara reported for Reuters.

China's factory activity growth slipped sharply in July as demand contracted for the first time in over a year, a private survey showed, broadly aligning with an official survey released on Saturday showing a slowdown in activity.

Indonesia, Vietnam and Malaysia saw factory activity shrink in July due to a resurgence in infections and stricter COVID-19 restrictions, according to private surveys.

The surveys highlight the divergence emerging across the global economy on the pace of recovery from pandemic-induced strains, which led the International Monetary Fund (IMF) to downgrade this year's growth forecast for emerging Asia.

"Anecdotal evidence suggested a resurgence in COVID-19 cases across Asia and ongoing supply chain disruption had led to demand easing in domestic and external markets," said Usamah Bhatti, an economist at IHS Markit.

China's Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) fell to 50.3 in July from 51.3 in June, marking the lowest level in 15 months, as rising costs clouded the outlook for the world's manufacturing hub.

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