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Operating conditions deteriorate for sixth month running
as…
… output, new orders and employment all decline further
Four of seven monitored countries post sub-50 PMI figures,
signalling a contraction
The ASEAN manufacturing downturn extended into the middle of the
fourth quarter, with operating conditions deteriorating for a sixth
month running in November, as signalled by the latest
IHS Markit PMI™.
The disappointing performance of the sector reflected further
contractions in both output and new orders, alongside one of the
fastest reductions in workforce numbers since December 2015. Survey
respondents continued to note that weak demand conditions were
responsible for falling order book volumes and, consequently,
production.
Adjusted for seasonal factors, the headline PMI- a single figure
indicator of manufacturing performance - posted 49.2 in November to
signal a deterioration in the health of the ASEAN manufacturing
sector. The average reading for 2019 so far (49.6) is the lowest
for four years.
Majority of monitored countries in decline
Country-level data highlighted further divergences during
November. Vietnam, Myanmar and the Philippines reported
improvements in operating conditions, but Indonesia, Malaysia,
Singapore and Thailand recorded a deterioration in the health of
their manufacturing sectors.
Notably, the last time a majority of the seven monitored ASEAN
countries reported a sub-50.0 headline PMI reading was 13 months
ago.
Myanmar tops the country rankings
For the tenth month in a row, Myanmar posted the highest PMI
reading of the seven monitored ASEAN countries. At 52.0, the latest
figure signalled a solid improvement in the health of the
manufacturing sector, driven by a marked increase in new orders
alongside solid output growth. Moreover, the PMI's 2019 average is
the highest seen during the four-year history of the Myanmar
survey.
Following closely behind is the Philippines, which has
registered headline figures only slightly below Myanmar in every
month since August to place as the second-best performing country
in our ASEAN rankings. Here the moderate improvement in operating
conditions seen in November was driven primarily by higher order
levels.
Vietnam was the only other country - of the seven monitored - to
report an improvement in the health of its manufacturing sector
during the latest survey period, with the headline PMI figure
signalling a marginal uptick, driven by growth in both output and
employment alongside a sharper increase in new orders.
Has Singapore's downturn bottomed out?
At the other end of the scale, Singapore registered another weak
performance during November. The headline figure (47.7) signalled a
further deterioration in operating conditions and extended the
current manufacturing downturn to 16 months. Official manufacturing
GDP data, which are currently updated to quarter three of this
year, have corroborated the PMI's weakness, recording a contraction
of 3% on an annual basis.
That said, the latest survey data highlighted an easing in
Singapore's downturn, with the deterioration easing to the softest
pace for eight months, and only a moderate rate overall. This
provided a tentative sign that the manufacturing downturn has
bottomed out towards the close of 2019. There was a further
positive sign for Singapore's manufacturing sector in November, as
firms' expectations of output in a year's time were the most upbeat
since May.
As such, December's PMI data will provide further indication as
to whether Singapore's manufacturing sector is turning around the
corner in the final month of the year.
Global manufacturing trend
The downturn seen in the ASEAN manufacturing sector is part of a
broader global trend. The JPMorgan Global Manufacturing PMI - an
aggregate survey indicator compiled by IHS Markit using
country-level data - posted below the 50.0 neutral mark for six
successive months up to October, before returning to expansionary
territory according to the latest survey data (see our commentary
on November's global PMI
here).
While lagging slightly behind the global PMI, ASEAN continued to
compare favourably to the eurozone in November, with the extent of
the downturn notably softer in the former. The headline ASEAN PMI
has outperformed its Eurozone equivalent in each of the past 10
months.
Looking ahead
The easing rate of contraction across the ASEAN manufacturing
sector coincided with an improvement in business sentiment during
November, with expectations regarding output over the coming 12
months improving to a five-month high.
While the November data showed some encouragement, a potential
recovery can only take root if order intakes pick up and client
demand strengthens in the coming months.
Lewis Cooper, Economist, IHS Markit
Tel: +44 1491 461019
lewis.cooper@ihsmarkit.com
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
