The headline PMI drops to the lowest amid record contractions of output, new orders, inventories and employment

by NUR HANANI AZMAN/ pic by ARIF KARTONO

ASEAN manufacturers suffered the most marked deterioration in operating conditions recorded in a survey’s near eight-year history during April, as the Covid-19 pandemic continues to hit the sector.

According to the latest IHS Markit Purchasing Manager’s Index (PMI) data, the sector’s output, new orders and exports all declined at unprecedented rates, while confidence in the output over the year ahead had sunk to a fresh low.

IHS Markit said the headline PMI plummeted to an all-time low of 30.7 in April, down from the previous record low of 43.4 in March, to indicate by far the largest monthly deterioration in manufacturing conditions since the survey began in July 2012.

“As was the case in March, the headline figure partly reflected a record lengthening of suppliers’ delivery times, the index for which is inverted in the PMI calculation, as longer times are usually associated with improving demand.

“This was outweighed, however, by unprecedented contractions in output, new orders, employment and pre-production inventories,”

IHS Markit said in a statement. The index stated that the seven constituent countries reported a further deterioration in operating conditions during April, with the downturn intensifying in every country except Singapore.

Indonesia reported the most marked deterioration overall, with the headline figure (27.5) slipping 17.8 points on the month to a fresh series low (since April 2011) amid factory closures and slumping demand.

Elsewhere, Myanmar recorded a third successive deterioration in operating conditions, with the headline PMI diving to a new record low (29) and indicating the second most severe downturn of all seven countries.

Singapore’s headline figure rose slightly from an all-time low in March to 29.3 in April, although it remained indicative of a substantial deterioration in the health of the sector.

Meanwhile, the negative impact of Covid-19 was also felt in Malaysia, with the headline index dropping further and signalling the most marked deterioration in operating conditions in nearly eight years of data collection during April.

IHS Markit economist Lewis Cooper said central to the substantial deterioration were record rates of decline across all five components of the headline figure, with output, new orders, employment and pre-production inventories dropping markedly across the region to drag the PMI down further as the impact of the Covid-19 outbreak intensified.

“Meanwhile, firms’ output expectations for the year ahead sank to a fresh series low. Overall, April data highlights the substantial impact of the coronavirus pandemic on Asean manufacturers.

“With measures to restrict the spread of the virus likely to continue for some time, and demand both at home and abroad essentially frozen, firms need to prepare for a tough second quarter (2Q),” Cooper said.

Unsurprisingly, companies continued to cut workforce numbers in April, with the rate of job shedding the fastest on record, according to IHS Markit.

Meanwhile, purchasing activity was scaled back substantially, with the fall the quickest in the series history.

It added that supply chain disruptions persisted, however, with suppliers’ delivery times lengthening to the greatest extent recorded in nearly eight years of data collection. In line with the reductions in purchasing and output, inventories fell at record rates.

“Firms confidence with regards to output over the next year slipped further in April, with huge uncertainty regarding the pandemic outbreak weighing heavily on expectations.

“The level of positive sentiments dropped to a fresh record low,” it said.