Race for factory work but supply cuts short looks

Factory activity continued in Europe last month and remained strong in Asia as demand grew, research was done, but rising commodity costs and supply constraints became a headache for businesses and weighed the recovery of export-driven economies.

European manufacturers intensified work at the fastest monthly pace in the history of PMI research but the increase in COVID-19 infection in other countries continued to disrupt supply chains.
Euro zone production activity would have been even faster without those hurdles, but the IHS Markit’s euro storage facility PMI has risen to 63.1 in May from April 62.9.

That was more than the initial 62.8 “flash” rating and the highest reading since the study began in June 1997.

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In Britain, a flood of new orders has helped keep record growth in factory growth, while the IHS Markit / CIPS production Purchasing Managers Index has risen to 65.6, the highest number since the start of the 1992 study.
“Business research continues to suggest that the economy, especially the manufacturing sector, is moving towards criminals, and it is in line with our view that recovery will be stronger in Q2 and the second half of the year,” Andrew Kennigham told Capital Economics. .

“That means the complex details may be a little stronger compared to what the survey said, not because of the challenges that exist.”

The euro zone was expected to emerge from a double-digit economic slowdown in the quarter, according to a Reuters survey, but the projected increase in inflation this year was not expected to be stable, and inflation forecasts will fall sharply.

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The disruption caused by the coronavirus epidemic has had a profound effect on supply chain supply, making it a market for equipment suppliers needed by factories, and has led to a dramatic increase in installation costs.

“The lack of resources will lead to increased inflation but it will not be huge and will be short-lived,” Kenningham said.

In the euro area, the inflation index has been the highest reading of the record and official data on Tuesday showed that inflation exceeded the European Central Bank target of just under 2% last month.


China’s factory activity has grown at a rapid pace this year with strong demand at home and overseas, a sharp rise in prices there and supply chain constraints in the production of other firms.

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The Caixin / Markit Manufacturing PMI, which focuses on small firms, rose to 52.0 last month, the highest since December and from 51.9 in April.

China’s official PMI on Monday showed that industry activity in the world’s second-largest economy declined slightly in May by paying for raw material costs.

Factory activity in Japan and South Korea was rated in May, underscoring the weakness of their acquisition.

“The proliferation of new diversity (COVID) is already having a detrimental effect on supply chains. If this trend continues, it will affect Asian manufacturers who have been seeking to separate supply chains from China,” said Toru Nishihama, a major economist in Dai. -this Life Research Institute.

“Asia’s recovery has been largely driven by outsiders without domestic demand. If companies have a problem exporting enough goods, that is detrimental to the regional economy.”

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The effects of the increase in production infection were most pronounced in India, where the growth of factory operations slowed down in ten months, the country’s PMI showed.

The outbreak of the Indian Coronavirus has infected 28 million people, killed more than 300,000, and forced many countries to set economic limits.

Taiwanese and Vietnamese factories were still holding on even though diseases were rising there.

Japan’s PMI or Jibun Bank declined in May as global chip shortages and disruptions into commodities reach automotive production, causing product growth to exceed expectations in April.
South Korea’s PMI has declined since April and although growth has grown for the eighth straight month, the inflation rate has risen sharply by 13 years.

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Asia’s fourth-largest economic recovery remained strong as South Korean exports put up a sharp increase in 32 years in May, due to strong global consumer demand as more economies began to open up.

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