Factories struggling as supply constraints hit, costs rise
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[October 01, 2021] By
Jonathan Cable and Leika Kihara
LONDON/TOKYO (Reuters) -Global
manufacturing activity took a big hit from supply chain bottlenecks and
escalating costs, exacerbated by pandemic-induced factory shutdowns in
Asia and signs of slowing Chinese growth, surveys showed on Friday.
While countries where outbreaks of the Delta coronavirus variant receded
saw an improvement in activity, growth shrank in some as chip shortages
and supply disruptions impacted those still struggling to shake off the
hit from COVID-19.
Euro zone and British manufacturing growth remained strong but activity
suffered from logistical issues, product shortages and a labour crunch
that are likely to persist and keep inflationary pressures high.
"Though some of the bottlenecks should soon start to ease, many sectors
– most notably those requiring semiconductors – are likely to face
disruption for much of 2022," said Martin Beck, senior economic advisor
to the EY ITEM Club.
"This signals activity is likely to remain constrained for some time to
come."
IHS Markit's final manufacturing Purchasing Managers' Index (PMI) sank
to 58.6 in September from August's 61.4 and Britain's PMI fell for a
fourth month in a row, dropping to 57.1 from 60.3. Anything above 50
indicates growth. [EUR/PMIM][GB/PMIM]
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Factories in Germany, Europe's largest economy, had been humming along
almost undisturbed during the pandemic lockdowns that have impacted the
services sector but shortages of intermediate goods and some raw
materials are now holding industry back.
Growth in French manufacturing weakened a tad more than initially
forecast, its PMI showed, as problems over supplies of goods weighed on
the industry.
Those supply bottlenecks kept pressure on the costs of the raw materials
factories need and manufacturers passed some of those increases to
customers and the euro zone output prices index approached the record
high seen in the summer.
Inflation in the common currency area jumped to a 13-year high of 3.4%
last month, preliminary official data showed on Friday, well above the
European Central Bank's 2.0% target.
Manufacturing growth in the United States also weakened last month, data
due later on Friday is expected to show. (reuters://realtime/verb=Open/url=cpurl://
apps.cp./
Apps/econ-polls?RIC=USPMI%3DECI)
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![](../images/100121PIX/2021-10-01T032225Z_3_LYNXMPEH901EG_RTROPTP_4_CHINA-POWER_small.JPG)
Machinery is seen at a factory specialising in heat treatment on
metals, which is out of operation, at an industrial park in Shenyang,
Liaoning province, China, September 30, 2021. REUTERS/Tingshu Wang
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ASIAN STRAIN
China's waning economic momentum dealt a fresh blow to the region's
growth prospects, with the official PMI on Thursday showing the
country's factory activity unexpectedly shrank in September due to wider
curbs on electricity use.
Although the private Caixin/Markit Manufacturing PMI fared better than
expected after slumping in August, growing signs of weakness in the
world's second-largest economy are clouding the outlook for neighbouring
countries.
"While coronavirus curbs on economic activity may be gradually lifted,
the slow pace at which this will happen means Southeast Asian economies
will stagnate for the rest of this year," said Makoto Saito, an
economist at NLI Research Institute.
Manufacturers in Japan, the world's third-largest economy, faced
pressure from pandemic restrictions and heightened supply chain
disruptions as well as shortages of raw materials and delivery delays
and its PMI marked its slowest pace of expansion since February.
Taiwan's factory activity continued to expand but at its slowest pace in
over a year while Vietnam's index was unchanged.
South Korea's, India's and Indonesia's PMIs rose. [nZRN002WZI]
"While regional PMIs showed that the disruption from large virus waves
in the region is easing somewhat, unmet orders continue to pile up,
meaning that the resulting shortages further down supply chains are set
to remain for some time to come," said Alex Holmes, emerging Asia
economist at Capital Economics.
Once seen as a driver of global growth, Asia's emerging economies are
lagging advanced economies in recovering from the pandemic's pain as
delays in vaccine rollouts and a spike in Delta variant cases hurt
consumption and factory production.
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(Reporting by Jonathan Cable and Leika Kihara; Editing by Ana Nicolaci
da Costa and Giles Elgood)
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