Growth in factory activity around the world slowed in May as China's heavy-handed COVID-19 curbs and Russia's invasion of Ukraine disrupted supply chains and dampened demand, adding to the woes of businesses already struggling with surging raw material prices.
Manufacturing growth slowed last month in economies as diverse as France, Japan to Malaysia, business surveys showed on Wednesday, illustrating the challenge policymakers face in trying to combat inflation while not stifling anemic economic activity.
S&P Global's final manufacturing Purchasing Managers' Index (PMI) for the eurozone fell to 54.6 in May from April's 55.5, its lowest since November 2020 though just ahead of a preliminary reading of 54.4. Anything above 50 indicates growth.
In Britain, manufacturing activity expanded last month at the weakest rate since January 2021 as producers of consumer goods struggled against a worsening cost-of-living crunch.
"Inflation is driving up the cost of doing business and dampening some consumer demand," said Simon Jonsson at KPMG.
"The conflict in Ukraine has caused new and worsened supply shortages, while COVID-19 restrictions in China, and border friction closer to home, have also adversely impacted UK manufacturing."
China's Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) stood at 48.1 in May, improving slightly from 46 the previous month, a private survey showed.
That was in line with official factory activity data released on Tuesday, which showed China's factory activity fell at a slower pace last month.
While COVID curbs are being rolled back in some cities, suggesting China's manufacturing slump has bottomed out, analysts do not expect a rapid rebound like in early 2020, saying fears of fresh outbreaks will continue to weigh on confidence and demand.
"Disruptions to supply chains and goods distribution may gradually ease as Shanghai's lockdown ends. But we're not out of the woods as China hasn't abandoned its zero-COVID policy altogether," said Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo.
"Rising inflation is forcing some Asian central banks to tighten monetary policy. There's also the risk of market volatility from U.S. interest rate hikes. Given such layers of risks, Asia's economy may remain weak for most of this year," Nishihama said.
Lockdowns in China have snarled regional and global logistics and supply chains, with both Japan and South Korea reporting sharp declines in output.
Japan's manufacturing activity grew at the weakest pace in three months in May and manufacturers reported a renewed rise in input costs, the PMI survey showed, as the fallout from China's lockdowns and the Ukraine conflict pressured the economy.
The final au Jibun Bank Japan PMI fell to a seasonally adjusted 53.3 in May from the previous month's 53.5, marking the slowest pace since February.
"Both output and new orders rose at softer rates, with the latter rising at the weakest pace for eight months amid sustained supply chain disruption and raw material price hikes," said Usamah Bhatti, an economist at S&P Global Market Intelligence.
"Disruptions were exacerbated by renewed lockdown restrictions across China, and contributed to a further sharp lengthening of suppliers' delivery times," Bhatti added.
Factory activity in the Philippines also slowed to 54.1 in May from 54.3 in April, while that for Malaysia fell to 50.1 from 51.6 in April, PMI surveys showed. Taiwan's manufacturing activity stood at 50 in May, down from 51.7 in April.
In a glimmer of hope, South Korea's exports grew at a faster pace in May than a month earlier, data showed on Wednesday, as a rise in shipments to Europe and the United States more than offset the fallout from China.
The monthly trade data, the first to be released among major exporting economies, is considered a bellwether for global trade.
India's factory activity expanded at a higher-than-expected pace in May, with demand resilient despite persistently high inflation.
