| Stagflation, war, supply chain chaos. The smorgasbord of challenges that the world's manufacturers are juggling is continuing to take a toll, with key gauges of activity remaining under pressure during May. The hit is most acute on the world's factory floor — Asia, where's China's steep slowdown has sent shockwaves through the region. Taiwan's manufacturing PMI fell to the 50-point level that separates contraction from expansion as both output and new orders declined. Gauges for Malaysia, the Philippines and Australia also slid. (Read the full story here.) A bright spot: South Korean exports, which great in May at a faster-than-expected pace. The hope is that as Shanghai's lockdown ends, it will help to ease buckled supply chains. (The latest here.) There's some evidence that China may be bottoming. Data released Tuesday showed China's factories continued to contract in May, though at a slower pace. The Caixin Manufacturing Purchasing Managers' Index for last month, released Wednesday, came in at 48.1 from April's 46. Wider Fallout Still, just as China's lockdown eases, Asia's manufacturers are having to worry about soaring inflation in Europe and the US that is eroding consumer spending power. Hong Kong-based Willy Lin, whose company Milo's Knitwear makes high-end sweaters for clients in Europe from its factory in Dongguan, is among those seeing signs that inflation is impacting demand. "My customers are starting to feel the pinch," Lin said. "Their demand is softer." In the US, the Dallas Fed's latest manufacturing survey showed the outlook for new orders slumped to the lowest level since May 2020. In Europe, the story remains largely about the spillover from Russia's invasion of Ukraine. New orders in the euro area fell for the first time since June 2020, with overall output growth picking up marginally, but still staying "sluggish," according to S&P Global's manufacturing Purchasing Managers Index. That trend was also on display in Germany and France, the region's two biggest economies. The euro zone is facing the threat of stagflation because of the war on its doorstep. The manufacturing sector's deterioration has also been "exacerbated by demand shifting to services, as consumers boost their spending on activities such as tourism and recreation," according to S&P Global's Chris Williamson. —Enda Curran in Hong Kong Another Year | Almost one-third of Texas manufacturers currently experiencing procurement-related disruptions expect it will take a year or more for the supply chain to repair itself, according to the May Dallas Fed Manufacturing report. That is up from 14.7% a year ago and 25.8% just three months ago. Some 87% of respondents are currently passing on at least some to all of the higher costs on to the customer. Meanwhile, Treasury Secretary Janet Yellen said she was wrong thinking inflation wouldn't be a persistent problem and President Joe Biden met with Fed Chair Jerome Powell to discuss high living costs. (Read those stories here and here.) - Long haul | After a bruising lockdown in Shanghai and severe curbs in Beijing were needed to halt the spread of Covid-19, China is doubling down on mass-testing in a move that's dashing hopes for a shift away from its costly Covid Zero strategy.
- Taking stock | Freightos, the digital platform for global freight-booking services, is set to go public through its tie-up with blank-check company Gesher.
- Plus side | The Treasury Department's No. 2 official highlighted the importance of US tariffs on Chinese goods as a tool to aid American jobs and competitiveness. Separately, Beijing said the US is "over-stretching" the concept of national security by imposing supply chain sanctions on China.
- Clear winner | Singapore is benefiting from a "flight to safety" in uncertain times and a regionalization of supply chains, according to the city-state's Economic Development Board.
- Tactics displayed | Shortages have exposed a dirty secret of the US car industry: Online shopping, where consumers are freed of pressure tactics from aggressive salespeople, is unreliable partly because many dealers want to work face-to-face.
- Electric gridlock | A surge in battery metal prices means it could take several years longer for electric vehicles to become as affordable as conventional cars, according to BloombergNEF.
 | - Ocean oversight | The US's federal maritime investigator recommended more consistent regulation of shipping containers following a two-year probe into the disruption of ocean transportation stemming from the coronavirus pandemic.
- Rebalance apace | The North American spot-trucking market will rebalance as newer capacity that entered to take advantage of elevated rates is forced out because of its higher cost base and shippers are relying less on the spot market, Bloomberg Intelligence senior transport analyst Lee Klaskow says.
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