Coronavirus: Asia’s manufacturing hubs face ‘tougher times ahead’, even after dreadful March

Manufacturing PMIs showed plunging confidence among Asia’s producers, with the exception of those in China and Taiwan

Eurozone slump also signals demand shock to come, with analysts warning things could get worse in the second quarter of 2020

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The Bank of Japan’s Tankan survey showed that sentiment among big companies sunk to a seven-year low in the first quarter of the year. Photo: Reuters

Published: 8:40pm, 1 Apr 2020Updated: 10:53pm, 1 Apr 2020

Parts of Asia and Europe were drenched in a bloodbath of manufacturing data on Wednesday, but economists warned that an even greater pummelling lies ahead, as the coronavirus pandemic paralyses global demand.

Surveys released on Wednesday painted a dire picture of some of the world’s key manufacturing hubs, while tumbling sentiment in the Eurozone, home to many companies sourcing parts from East Asia, laid bare the demand shock facing the region.

“It is very clear that we have a demand shock and supply shock simultaneously, but demand shocks are likely to become stronger in the coming months as Asia’s top customers, Europe and the US, are affected by measures to contain the virus,” said Trinh Nguyen, senior emerging Asia economist at Natixis.

“In other words, the sub-components foreshadow tougher times ahead for Asian manufacturers in quarter two of 2020, as they face a world with suppressed demand.”

The day after the World Bank slashed its growth forecast for China and predicted rising poverty in East Asia due to the coronavirus’ economic impact, a slew of new numbers revealed a widespread crash in business confidence.

The Bank of Japan’s Tankan survey showed that sentiment among big companies sunk to a seven-year low in the first quarter of the year, the manufacturing purchasing managers’ index (PMI – a survey of business conditions among factory owners) for the Association of Southeast Asian Nations (Asean) dipped to an all-time low in March, while the Eurozone manufacturing PMI fell to its lowest point since 2009 last month.

“Asean manufacturers reported their worst month on record in March,” read a statement from IHS Markit, which conducted the survey. “Operating conditions deteriorated at the sharpest pace since the survey began in July 2012 amid record declines of output, new orders, inventories and employment.”