Asia's factory activity slows as China's COVID curbs disrupt supply chains

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Asia's factory activity slows as China's COVID curbs disrupt supply chains

ASEAN: Asia's factory activity slowed in May as China's heavy-handed COVID 19 curbs continued to disrupt supply chains and dampen demand, adding to the woes for some of the region's economies that are already under strain from surging raw material costs.

Business surveys show on Wednesday that the challenges facing policymakers face with tighter monetary policy and that manufacturers have slowed activity last month in countries ranging from Japan to Taiwan and Malaysia.

In May, China's Markit Manufacturing Purchasing Managers' Index PMI stood at 48.1, a move that was slightly improved from 46.0 the previous month, but is still below the 50-point threshold that separates contraction from expansion, a private survey showed.

The results were in line with Tuesday's official data showing that China's factory activity fell at a slower pace in May. While COVID 19 curbs are being rolled back in some cities, they still weigh heavily on confidence and demand.

As Shanghai's lock down ends, supply chains and goods distribution may start to be slowed. 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 Asian central banks to tighten their monetary policy. There is the risk of market volatility due to the US interest rate hikes. Asia's economy may be weak for most of the year because of the layers of risks.