By Leika Kihara

TOKYO (Reuters – Asia’s factory activity slowed as China’s strict coronavirus curbs continued disrupting supply chains and dampening demand. These measures are adding to problems for many of the region’s already stressed economies due to rising raw materials costs.

Business surveys revealed that manufacturers showed a slowdown in activity in Japan, Taiwan and Malaysia last month. It is an indication of the challenges policymakers are facing in combating inflation through tighter monetary policies – but without depressing growth.

China’s Caixin/Markit Manufacturing Purchasing managers’ Index (PMI), which was at 48.1 in May, saw an improvement of 46.0 from the previous month, while remaining below the threshold that differentiates contraction and expansion. A private survey revealed this.

This result was consistent with Tuesday’s official data which showed that China’s factory activity declined at a slower rate in May. While some COVID curbs have been lifted in some areas, they still impact confidence and demand.

China lockdowns have disrupted global supply and logistics chains. Japan and South Korea both reported significant declines in their output.

Japan’s manufacturing activity saw its lowest growth in three years in May. Manufacturers reported an increase in input costs. The PMI survey revealed that this was because of the pressure from China’s lockdowns, and the Ukraine conflict.

From 53.5 in February, the final au Jibun Bank Japan PMI dropped to 53.3 in May. This is the slowest rate since February.

“Both output and new orders rose at softer rates, with the latter rising at the weakest pace for eight months amid sustained supply chain disruption and raw material price hikes,” said Usamah Bhatti, an economist at S&P Global (NYSE:) Market Intelligence.

“Disruptions were further aggravated by China’s renewed lockdown restrictions, which contributed to an increase in delivery times for suppliers.”

PMI survey data showed that factory activity also decreased in the Philippines to 54.1 in May, from 54.3 in April. In Malaysia, however, it fell to 50.1 in April from 51.6. Manufacturing activity in Taiwan was 50.0 in May, compared to 51.7 in April.

There is hope for South Korea, with exports growing at a quicker pace than usual in May, data from Wednesday showed. The increase in shipment to Europe, the United States and other countries more than offset China’s restraints.

The South Korean monthly trade data is the most important among large exporting countries and it’s considered to be a benchmark for international trade.