Slowing of Asian Manufacturing Adds to Global Recession Fears

Asia’s manufacturing slowed markedly in June as many firms suffered supply disruptions because of China’s tough COVID-19 lockdowns. This, in addition to worrying signs of economic downturns in Europe and the US, have analysts fearing a global recession.

Several economic releases showed China’s manufacturing improved in June, but Japan, South Korea and Taiwan are all showing signs of strain from supply disruptions and ever-increasing costs.

The latest au Jibun Bank Japan Manufacturing purchasing managers’ index (PMI) slipped to 52.7 in June from 53.3 in the previous month, staying above the 50-mark that separates economic expansion from contraction.

South Korea’s S&P Global PMI fell to 51.3 in June from 51.8 in May, dropping for a second month due to supply constraints coupled with a truckers’ strike in June.

What does this mean for me? 

Lockdowns in China have snagged regional and global supply chains. China’s economy has started to chart a recovery path out of the supply shocks caused by strict lockdowns, although such risks remain as soft consumer spending and a fear of a fresh wave of infections.

As a diversified investor, you should keep watch of the twin forces of monetary tightening in Europe and the US, as well as Asian slowdowns. Aggressive US interest rate hikes to clamp down on skyrocketing inflation could push the country into recession, dragging down global demand.