Asia is emerging as a weak link in an otherwise strong global economic recovery, as new pandemic restrictions restrain manufacturing in some countries and the exports that have powered the recovery in China show signs of slowing.

With progress on vaccinations slower than in the West, Asia is hitting new pandemic highs driven by the Delta variant of the coronavirus. The spread of the virus is threatening to hurt consumer confidence and erode the advantage of many Asian economies as manufacturing powerhouses.

Countries in Southeast Asia have been among the hardest hit, prompting new social-distancing restrictions and lockdowns in countries that had largely avoided those measures earlier in the pandemic. As factory production contracts across Southeast Asia, Indonesia and Malaysia, which have recently faced surging caseloads and Covid-19 deaths, have been among the worst affected, according to IHS Markit.

Foreign demand has propelled export economies such as China and South Korea during the pandemic, with factories churning out consumer goods from bikes to furniture and electronic gadgets for overseas consumers. But that engine is showing signs of slowing. In China, both private and official manufacturing purchasing-managers’ Indexes fell to their lowest levels in over a year in July, suggesting that domestic and overseas demand were cooling off.

China is facing its most widespread Covid-19 outbreak in months with more than 200 cases linked to the city of Nanjing. Authorities kept tight border controls and ramped up vaccination drives, but the Delta variant is challenging their pandemic response. Photo: Alex Plavevski/EPA/Shutterstock The Wall Street Journal Interactive Edition

In the West, higher vaccination levels are allowing economic activity to return to normal levels. In the U.S., which has vaccinated 49.6% of its population, economic output rose above its pre-pandemic level in the second quarter.

Factories in Europe reported near-record levels of output growth in July. In the eurozone, where economies have loosened social restrictions in recent months, firms hired staff at a record pace in July as inflows of new orders outstripped production to an extent unprecedented in 24 years of surveys by IHS Markit.

In the U.S., some of the supply constraints that have plagued manufacturers for the past four or five months appear to be easing slightly, according to the Institute for Supply Management’s Purchasing Managers’ Index for July. Price increases of raw materials slowed and hiring expanded. Firms also reported fewer supplier delays.

Meanwhile, output and customer demand continued to expand strongly but at a slightly slower pace than in June.

“We’ve still got a long ways to go,” said Tim Fiore, who runs the ISM’s manufacturing surveys. “Backlog is near record.”

Close to 40% of the population in advanced economies have been fully vaccinated, compared with less than half of that percentage in emerging-market economies, according to the International Monetary Fund. In many southeast Asian countries, the rate is even lower. About 8% of the Indonesian and Philippine populations have been fully vaccinated, and around 6% in Thailand.

“The 2020 strategy [of Covid-19 containment] is an unsustainable strategy going forward because you just do that to buy time,” said Trinh Nguyen, Hong Kong-based senior economist at Natixis.

Malaysia has required factories in nonessential sectors such as apparel to close since early June after a series of Covid-19 outbreaks linked to workplaces.

Tan Thian Poh, the head of Asia Brands Bhd., a clothing manufacturer, said the regulations mean he hasn’t been able to produce apparel for two months, delaying deliveries to foreign buyers. His factories’ only lifeline has been producing personal protective equipment, which is deemed an essential sector by the government, although even then he is restricted to 60% of his usual workforce. He said that clothing buyers may eventually switch to suppliers from outside Malaysia. “This uncertainty has impacted us very, very badly,” he said.

A vaccination site in Manila; about 8% of the Philippines’ population has been fully vaccinated.

A vaccination site in Manila; about 8% of the Philippines’ population has been fully vaccinated.

Photo: Ezra Acayan/Getty Images

Given the region’s tightly integrated supply chains, factory shutdowns in one country can cause problems elsewhere. PT Pan Brothers Tbk, an Indonesian garment producer with 31,000 workers, has been allowed to operate with full staff despite recent government restrictions on manufacturers because it has been designated as critical. However, it hasn’t completely avoided Covid-19 production challenges, as raw-material deliveries from Vietnam and other countries have been delayed because of lockdowns in those places, said Anne Patricia Sutanto, the company’s vice chief executive.

In China, a subindex of the official manufacturing PMI tracking new export orders softened to 47.7 in July, the lowest level since June 2020. A reading below 50 indicates that more exporters report a fall in orders, suggesting that foreign demand is tapering off.

The Delta variant has been detected in more than 26 cities in China so far, threatening to further damp already-sluggish consumer sentiment as authorities imposed mass-scale lockdowns.

South Korea’s exports sector, which rose 29.6% in July from a year ago compared with 39.8% growth in June, will face similar headwinds, including supply-chain uncertainties, in coming months.

“ “Even if the immediate threat of the virus subsides in a few, short months, its economic impact may linger for quite some time.” ”

— Frederic Neumann, HSBC

“Even if the immediate threat of the virus subsides in a few, short months, its economic impact may linger for quite some time,” Frederic Neumann, co-head of Asian Economics Research at HSBC told clients in a note on Monday.

Analysts also warn that if the Delta variant continues to spread fast in Asia while vaccination rollouts fall behind, it can lead to a string of longer-term economic impacts.

With the region serving as a base for global manufacturing, lockdowns have already hampered output in countries such as Thailand, where some factories for Toyota Motor Corp. were closed temporarily. That risks worsening already-strained global supply chains amid surging shipping costs and shortages of some components.

“That doesn’t bode well for the global inflation picture,” said Jingyi Pan, Singapore-based economics associate director at IHS Markit.

A surge in Covid-19 cases could also make it harder for central banks in Asia to stick to initial plans of normalization, but force some to keep policy more accommodative for longer. That can add to the risk of capital outflows faced by these countries, given the rising chance that the Federal Reserve could tighten policy sooner amid growing inflation pressure.

All of these headwinds to full recovery in the region could prompt more countries to reconsider the effectiveness of imposing extended lockdowns, and speed up vaccination rollouts, a factor that would allow them to reopen the economy, say economists. Singapore, which plans to ease travel restrictions later this year when it has fully vaccinated about 80% of its population, could be a good case to follow.

“The critical factor is how long and how strictly do governments have to manage movement controls or social distancing to keep the public-health issue at bay,” said Steven Cochrane, chief APAC economist at Moody’s Analytics in Singapore.

“Without the rapid spread of vaccines, there aren’t a whole lot of choices in the region now except to heighten the movement restrictions,” he added.

—Tom Fairless in Frankfurt and David Harrison in Washington contributed to this article.

Write to Stella Yifan Xie at stella.xie@wsj.com and Jon Emont at jonathan.emont@wsj.com