Sluggish global demand deepened the decline in manufacturing activity across Europe and the US and remained a major challenge for many of Asia's big exporters, reports show.

The Purchasing Managers' Index (PMI) – a key gauge of manufacturing activity – edged up to 49.6, officials said, from April's 47.4, which was the worst reading since early 2020.

Shanghai's lockdown and wider China curbs are taking a toll on the world's number 2 economy during a key year for President Xi Jinping, who is expected to secure a third leadership term in the autumn.

Health officials have warned tighter measures could be on their way, as concerns mount over the resilience of China's 'zero-Covid' approach in the face of the highly-transmissible Omicron variant.

Shortages – exacerbated by years of under-investment in basic chip production, while high-end semiconductors were favoured – are expected to last at least two years.

Countries where large outbreaks of the Delta variant receded saw an improvement in activity, such as Indonesia and India but factory activity shrank in Malaysia and Vietnam.

The Malaysian Employers Federation says operations become ineffective when factory offices are allowed to reopen but corporate offices must remain closed.

Southeast Asia was hit particularly hard with factory activity shrinking in Vietnam, Indonesia and Malaysia because of virus outbreaks and output suspensions, surveys show.

The government has been trying to contain outbreaks with a 'bubble and seal' policy.

Senior minister Ismail Sabri Yaakob says they are not included in the category of essential needs.