Asean’s manufacturing index down in October

By SHAHEERA AZNAM SHAH / Graphic By TMR

The manufacturing sector across Asean countries saw further deterioration to 49.8 in October, according to the headline Purchasing Managers’ Index (PMI).

According to the Nikkei Asean Manufacturing PMI compiled by IHS Markit Ltd, the index reading was at its lowest in 15 months and has marked its first below the no change level at 50 since December 2017.

“The latest survey data showed the weakest growth of output at Asean manufacturing firms in 15 months. The new businesses fell at the fastest pace in two years,” it said in a report on Monday.

IHS Markit economist David Owen said most countries under the firm’s survey saw a drop in both output and new businesses as the export orders slumped at the quickest pace in two years.

“Following a nine-month sequence of improving business conditions, the Asean manufacturing sector contracted marginally in October.

“Input costs rose at the joint quickest rate in over 4½ years, attributed to inflation of raw material prices and national exchange rate movements,” he said.

However, he added that industry players had responded with the strongest increase in output charges since September 2015, indicating the persistence of price pressures across the region.

The monthly report said the manufacturing performance remained uneven across the region, with only three of the seven countries reporting an improvement in the operating conditions.

“The Philippines topped the Asean manufacturing rankings again in October, with a substantial rate of expansion in output and new orders.

“Malaysia and Thailand saw slight deteriorations in operating conditions in October. Myanmar saw a modest drop, albeit weaker than in September, while the health of Singapore’s manufacturing sector declined sharply,” it said.

IHS Markit said the new export order had decreased at a faster rate in October and was at its steepest in 22 months, as demand from overseas markets was subdued.

“With the output growth falling to a 15-month low, purchasing activity at Asean manufacturing firms had decreased in October.

“The level of input buying contracted at the fastest rate since July 2017. Also, the stocks of both pre-production and post-production goods fell at marginal rates,” it said.

It noted that vendors’ performance had worsened for six of the seven monitored countries in October.

“Anecdotal evidence pointed to the transportation issues in some countries, as well as the adverse weather conditions,” it said.

IHS Markit said Asean manufacturing firms experienced sharp inflationary pressure in October, with the rate of input price inflation rising to the joint-highest in over 4½ years.

“Myanmar, the Philippines and Indonesia experienced substantial price increases.

“Survey respondents pointed to the higher raw material costs and exchange rate factors as influencing the rise in input prices. As a result, selling prices of manufactured goods grew at the fastest pace since September 2015,” it said.

Despite the deterioration of operating conditions in October, IHS Markit said Asean manufacturing businesses maintained a strong positive outlook for the coming year.

“The level of optimism improved marginally from September, with the Philippines, Indonesia and Vietnam remaining the most confident about future output,” it said.