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Asia's factories sustain expansion, supply chain woes cloud outlook A spike in COVID-19 infections in countries like Taiwan and Vietnam could disrupt semiconductor output and supply chains, posing a headache for manufacturers
Asia's factory activity continued to expand in May thanks to an ongoing recovery in global demand, surveys showed on Tuesday, though rising raw material costs and supply chain constraints clouded the outlook. A spike in COVID-19 infections in countries like Taiwan and Vietnam could disrupt semiconductor output and supply chains, posing a headache for manufacturers and weighing on Asia's export-driven recovery, analysts say. Japan and South Korea saw an expansion in factory activity moderate in May, purchasing managers' indexes (PMI) showed on Tuesday, underscoring the fragile nature of their recoveries. "A spread of new variants is already having a negative impact on supply chains. If this situation persists, it would hit Asian manufacturers that had been scrambling to diversify supply chains out of China," said Toru Nishihama, chief economist at Dai-ichi Life Research Institute. "Asia's recovery has been driven more by external than domestic demand. If companies have trouble exporting enough goods, that bodes ill for the region's economies," he said. China's factory activity expanded at the fastest pace this year in May on solid demand at home and overseas, though sharp rises in input prices and strains in supply chains crimped some firms' production, a survey showed on Tuesday. The Caixin/Markit Manufacturing PMI, which focuses on smaller firms, rose to 52.0 last month, the highest since December and inching up from April's 51.9.