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ASEAN Manufacturing PMI – January 2019

The manufacturers of the ASEAN region are unhappy with the drop in business, as is evident from the report compiled by IHS Markit of Nikkei ASEAN Manufacturing Purchasing Managers’ Index.

The manufacturing PMI dropped in the January month to 49.7; it was at 50.3 in December. Now, that is not a good start to the New Year at all. Let’s see the feedback for each country (seven countries are monitored as ASEAN; listed below as per descending PMI numbers).

  1. Philippines: Highest  PMI in January notwithstanding a softer increase in production compared to the previous month.
  2. Vietnam: Weaker improvements in overall operating conditions. Good signs on the new order front where orders rose slightly. Higher new export orders. Strongest increase in employee numbers.
  3. Myanmar: Weaker improvements in overall operating conditions.
  4. Thailand:  Business conditions unchanged, modest manufacturing growth, no overall increase in new orders, slight increase new orders from abroad.
  5. Indonesia: Lower production levels.
  6. Malaysia: Operating conditions declined, drop in input costs (most in four years).
  7. Singapore: Big drop in output & new business. Drop in employee numbers.

Reasons for the ASEAN slowdown

  • Declining overall sales
  • Slump in exports
  • Reduced raw material purchase
  • Decrease in inventory

Positive Outlook

While January was not a happy month for the Purchase Managers, as a group, they are hopeful that going forward this year will see increase in new orders as well as in the production numbers. The level of positive sentiment for the year is actually the highest since May 2018.

As per David Owen, Economist at IHS Markit, “ASEAN countries struggled at the beginning of 2019, as manufacturers saw new orders fall and output growth moderate from December. Export demand was still a key factor weighing on the sector’s performance, as trade tensions around the world caused export orders to fall for the sixth month running. At the same time, the slowdown has led to an easing in inflationary pressures, with the rate of cost inflation at a fresh survey low in January. While this is likely to ease pressure on margins, particularly after steep increases in costs through 2018, it is likely that new orders will remain sparse without a boost to domestic spending or a recovery in foreign demand.”

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CATEGORY: Economy, Manufacturing

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