Asian factories gain tighter momentum, supply chain concerns drag outlook

Asia’s factory activity remained robust in May, and the expansion was owed mainly to an ongoing rebound in global demand. However, an increase in costs of raw materials and supply chain bottlenecks heavily dampened the region’s economic outlook.

China and South Korea saw a minimal jump in their respective purchasing managers’ index (PMI). The readings indicated that the countries’ economic recoveries were still fragile.

Taiwan’s PMI was read at 62.0, placing lower than its April record but still above the 50 threshold that separates growth from decline. Vietnam also managed to stay above the threshold with a 53.1 reading in May.

A surge in COVID-19 infections could potentially undermine semiconductor output and supply chains. That alone would likely inflict pressures for manufacturers and might also drag the region’s export-led economic rebound.