WASHINGTON (Reuters) - Asia’s robust economic recovery from last year’s coronavirus low is losing momentum as a surge in Covid-19 cases sees shops empty again and factories close, dimming prospects for corporate profit growth after a blockbuster half year.
The rapid spread of the highly infectious Delta variant of the coronavirus and low vaccination rates have caught much of the region off guard, especially in emerging markets, even as economies in Europe and North America reopen.
“It’s clear that economies across the region are suffering more from Covid-19 than they previously did. The biggest factor is that Asia is poorly vaccinated,” said Rob Carnell, Asia-Pacific head of research at ING in Singapore.
While year-on-year corporate and economic indicators continue to show strong recovery, flattered by comparisons with 2020s sharp declines, quarter-on-quarter indicators reveal flagging momentum.
Asia’s biggest firms are likely to post their first quarter-on-quarter profit decline in six quarters in July-September, falling 6.19 per cent, showed a Reuters calculation based on Refinitiv Eikon analyst data of 1,069 companies with market capitalization of at least $1 billion.
“There’s no mistake there will be a slowdown in the third quarter,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
In the near-term, much depends on vaccination progress in Southeast Asia – a major production base – and whether China takes extra steps to support its economy, Fujito said.
Vehicle sales in China, the world’s second-largest economy, slipped in July versus the same month last year, falling for a third consecutive month amid virus outbreaks and a global semiconductor shortage which is curbing output.
Toyota, the world’s largest carmaker by sales volume, said last week it would cut September production by 40 per cent from its previous plan due to the chip crunch, though it retained production and sales targets for its financial year.