Operating conditions at ASEAN manufacturing firms deteriorated at the fastest pace since November 2015 in August, according to the headline IHS Markit Purchasing Managers’ Index (PMI™), with a fall in new business and output weighing on the headline index reading.
The headline index fell further below the 50.0 neutral mark, slipping from 49.5 in July to 48.9 in August and signalling a further deterioration in the health of the ASEAN manufacturing sector, the quickest since late-2015.
Contributing to the decline was a moderate reduction in new business inflows and a second consecutive downturn in output. The strongest fall in external demand since November 2015 also weighed on overall new orders. That said, only three of the seven monitored countries reported a deterioration in operating conditions.
Singapore reported a sharp downturn in the health of its manufacturing sector, with August’s headline reading (42.9) the joint-lowest in the series history. Malaysia also posted a solid deterioration in manufacturing conditions, with the headline index (47.4) posting at its lowest reading since March. Indonesia registered back-to-back falls in business conditions, with the headline figure (49.0) highlighting the quickest decline since July 2017.
By comparison, Thailand’s headline figure (50.0) signalled no change in operating conditions, highlighting a stagnation across the manufacturing sector. Meanwhile, Vietnam’s headline index (51.4) signalled a marginal expansion, albeit the slowest in six months. The Philippines reported one of the fastest improvements in operating conditions in 2019 so far.
At 51.9, the headline index signalled a modest upturn. Lastly, Myanmar’s headline index (52.0) marked the tenth consecutive improvement in conditions, albeit the slowest in seven months.
Overall the ASEAN manufacturing sector struggled in August, as operating conditions fell to a near four-year low. Foreign demand ell for the second time in three months, whilst new business declined for the first time since February. Order book volumes fell marginally, breaking a five-month sequence of growth and leading to the first back-to-back decline in production since July 2017. That said, the reduction in output was only marginal overall.
Subdued demand conditions led to a faster fall in buying activity, quickening moderately from July to the fastest since November 2015. Firms remained cautious about their inventories in August, with pre-production stocks decreasing for the third successive month, albeit at a softer pace than July. Stocks of manufactured items fell fractionally, with the rate of stock depletion unchanged from July. Vendor performance improved further in August, as suppliers’ delivery times were shortened.
August data highlighted a third successive monthly reduction in workforce numbers. That said, the rate of job shedding eased slightly from July’s three-and-a-half-year low. Notably, only three of the seven monitored countries reported a fall in workforce numbers, whilst the Philippines recorded its strongest expansion of staffing levels for almost two years.
On the prices front, ASEAN manufacturers registered muted inflationary pressures in August. Input costs increased only marginally, and at a slower rate than in July. Meanwhile, output price inflation eased amid difficult demand conditions.
Volumes of incomplete work fell for the second consecutive month, although the rate of backlog depletion eased from July.
Finally, expectations regarding future output remained generally upbeat in August, with the level of positive sentiment broadly unchanged from July. That said, it remains firmly subdued compared to the series average. (PR)
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