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Asian factories shake off lockdown blues, now face supply headaches

By Leika Kihara

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Asian factories shake off lockdown blues, now face supply headaches
© Reuters. FILE PHOTO: Staff member works inside a non woven filter fabric factory, where the fabric is used to make surgical face masks, in Taoyuan, Taiwan, March 30, 2020. REUTERS/Ann Wang

By Leika Kihara

TOKYO (Reuters) – Asia’s manufacturing activity grew in October as emerging economies saw COVID-19 infections subside, but rising input costs, material shortages and slowing Chinese growth cloud the outlook, business surveys showed on Monday.

Policymakers in the region face pressures on multiple fronts as they steer their economies out of the pandemic-induced doldrums while also trying to keep prices under control amid rising commodity costs and parts shortages.

China’s factory activity expanded at its fastest pace in four months in October, the private Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) showed on Monday, as dwindling COVID-19 cases drove up domestic demand.

But a sub-index for output showed production shrank for the third straight month due to power shortages and rising costs, falling in line with Sunday’s official PMI that showed factory activity in October shrank more than expected.

“Shortages of raw materials and soaring commodity prices, combined with electricity supply problems, created strong constraints for manufacturers and disrupted supply chains,” said Wang Zhe, senior economist at Caixin Insight Group.

Factory activity in October expanded in Vietnam, Indonesia and Malaysia as operations gradually normalised after being hit by shutdowns caused by a spike in COVID-19 infections.

Taiwan saw manufacturing activity growth accelerate on robust chip demand, while Japan’s factory activity expanded at the fastest pace in six months in October in an encouraging sign for the world’s third-largest economy.

In a sign of the patchy nature of Asia’s recovery, however, South Korea’s factory activity rose at the slowest pace in 13 months in October on shrinking output and softer demand.

Material shortages and delivery disruptions drove up Japan’s input prices by the most in over 13 years.

“While October Manufacturing PMIs point to a strong rise in manufacturing output, industry is likely to be working through huge backlogs of orders for many months to come and resulting supply shortages further afield are set to persist,” said Alex Holmes, emerging Asia economist at Capital Economics.

The final au Jibun Bank Japan PMI in October rose to 53.2 from 51.5 in the previous month, expanding for the ninth consecutive month.

South Korea’s PMI, by contrast, fell to 50.2 in October from 52.4 in September, though it managed to stand above the 50-mark threshold that indicates expansion in activity, for a 13th straight month.

Vietnam’s PMI rose to 52.1 from 40.2 in September, while that of Indonesia increased to 57.2 from 52.2, the surveys showed. Malaysia’s index stood at 52.2, up from 48.1.

Asia’s emerging economies have lagged 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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Economic Indicators

Italy says can exceed 3.1% growth target for 2022 despite energy prices

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© Reuters. FILE PHOTO: People walk along the Galleria Vittorio Emanuele II shopping mall in Milan, August 25, 2015. REUTERS/Flavio Lo Scalzo

ROME (Reuters) – Italy’s Treasury said the country’s economy could grow this year by at least as much as Rome’s official target of 3.1% set in April, despite the negative impact of surging energy prices.

Italy grew 0.1% in the first quarter from the previous three months, national statistics bureau ISTAT said last month, revising up a preliminary estimate of a 0.2% contraction.

This left Italy with so-called “carryover” growth of 2.6% this year, assuming gross domestic product was flat in the remaining three quarters, ISTAT said.

Announcing on Monday the bond issuance programme for the third quarter, the Treasury said it expected growth to accelerate in the second quarter, compared with the first three months.

This still makes it plausible to reach or exceed the 2022 growth target of 3.1%, it said in its debt issuance report.

Prime Minister Mario Draghi’s government in April revised down its 2022 economic growth forecast to 3.1% from a 4.7% projection made last September.

The government has budgeted since January more than 33 billion euros ($34.90 billion) to soften the impact of sky-high electricity, gas and petrol costs.

($1 = 0.9456 euros)

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Economic Indicators

French consumer confidence falls more than expected in June

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© Reuters. A woman shops at a fruit and vegetables shop in Paris, France, June 10, 2022. REUTERS/Sarah Meyssonnier

PARIS (Reuters) – French consumer confidence fell more than expected in June, hitting a near nine-year low as concerns about the economic outlook surged in the face of high inflation and political uncertainty, a survey showed on Tuesday.

The INSEE official statistics agency said its consumer confidence index fell to 82 in June from 85 in May and the lowest level since July 2013.

A Reuters poll of 14 economists had an average forecast of 84 with the lowest estimate for 83.

Although households’ concerns about future inflation remained well above the long-term average, they eased in June for the third month in a row.

However, household sentiment about the general economic outlook continued to worsen, falling to the lowest level since May 2020 when France was in the second month of its first and most strict COVID-19 lockdown.

While surging inflation has stressed households in recent months, France’s political situation has added to uncertainty about the economic outlook since President Emmanuel Macron’s party lost its ruling majority in legislative elections this month.

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Peru truckers, farmers to strike over fuel and fertilizer costs

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© Reuters. FILE PHOTO: People walk next to parked trucks during a national transportation strike against fuel prices, in Lima, Peru March 18, 2021. REUTERS/Angela Ponce/File Photo

By Marco Aquino

LIMA (Reuters) – Peru’s truckers and some farm groups will go on strike on Monday after failing to reach agreements with the government seeking measures to reduce the impact of steep global price rises of fuel and fertilizer, sector leaders said on Sunday.

Union leaders met on Friday and Saturday with government representatives, with demands including considering freight transport a “public service” that would reduce costs and curb competition from truckers from neighbor countries.

“We are firm in plans to strike with all our bases nationwide,” the leader of the heavy load haulage and drivers union Marlon Milla told radio station RPP. The union has 400,000 cargo transport units in 14 of the 25 regions of the country.

High global fuel prices linked to Russia’s invasion of Ukraine have stoked unrest in Peru, the world’s No. 2 copper producer, while shortages of fertilizer have raised fears over food supply with the government struggling to secure shipments.

The government of leftist President Pedro Castillo, who has seen his popularity tumble since taking office last year, has taken measures to curb the rising cost of living, but the annual inflation rate remains at around 8%, its highest level in 24 years.

Some farming unions also announced strikes on Monday, in protest at the rise in fertilizer prices and shortages.

Latin American leaders are grappling to bring down spiraling prices despite major interest rate hikes. Trucking protests over fuel costs have hit Argentina while Ecuador is being roiled by protests in part linked to gas prices. [L4N2YB27W]

“The dialogue has not been exhausted, we are in a permanent session of ministers to avoid protest,” Justice Minister Félix Chero told reporters on Sunday. The government is offering subsidies for road tolls and fertilizer costs.

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