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Asias Factories Sustain Expansion but Supply Squeeze Dims Outlook

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Asias factory activity continued to expand in May thanks to an ongoing recovery in global demand, surveys showed on Tuesday, though rising raw material costs and supply chain constraints clouded the outlook.

A spike in COVID19 infections in some countries could disrupt supply chains, posing a headache for manufacturers and weighing on Asias exportdriven recovery, analysts say.

Japan and South Korea saw expansions in factory activity moderate in May, purchasing managers indexes PMI showed on Tuesday, underscoring the fragile nature of their recoveries.

A spread of new variants is already having a negative impact on supply chains. If this situation persists, it would hit Asian manufacturers that had been scrambling to diversify supply chains out of China, said Toru Nishihama, chief economist at Daiichi Life Research Institute.

Asias recovery has been driven more by external than domestic demand. If companies have trouble exporting enough goods, that bodes ill for the regions economies, he said.

Chinas factory activity expanded at the fastest pace this year in May on solid demand at home and overseas, though sharp rises in input prices and strains in supply chains crimped some firms production, a survey showed on Tuesday.

The CaixinMarkit Manufacturing PMI, which focuses on smaller firms, rose to 52.0 last month, the highest since December and inching up from Aprils 51.9.

The survey followed Chinas official PMI on Monday, which showed factory activity in the worlds…

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