KUALA LUMPUR,. Asean’s manufacturing sector dipped with the headline Purchasing Managers’ Index (PMI) dropping to 49.8 in October from 50.5 in September, the first time it has deteriorated in 2018.
Nikkei Asean, in a statement, noted that this was the weakest growth output for Asean manufacturing firms in 15 months and was the first time since December 2017 that the PMI has posted below the 50.0 level.
It stated that this was partially due to a decrease in new export orders in October.
“New export orders decreased at a faster rate in October, as demand from overseas markets was subdued. Though modest, the pace of contraction was the steepest in 22 months.
“With output growth falling to a 15-month low, purchasing activity at Asean manufacturing firms decreased in October. The level of input buying contracted at the fastest rate since July 2017.
“At the same time, stocks of both pre- and post-production goods fell at marginal rates. Stocks of purchases have now fallen in 20 consecutive months.
“Alongside the decline in new orders, firms noted reduced capacity pressures in October, with survey data indicating a modest drop in outstanding business. This was helped by a seventh successive expansion of employment,” it said.
Anecdotal evidence pointed to worse vendor performance in six out of the seven countries being monitored due to transportation issues and adverse weather conditions.
Inflation also put pressure on the manufacturing firms in the region with the rate of input price inflation rising to the joint-highest in over four-and-a-half years.
“Notably, Myanmar, the Philippines and Indonesia experienced substantial price increases.
Survey respondents pointed to 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,” the statement said.
However, the region’s manufacturing businesses retained a strongly 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.
This is attributed to the fact that the countries mentioned above still showed signs of growth with the Philippines topping the manufacturing rankings again last month with a substantial rate of expansion in output and new orders.
Vietnam came second with Indonesia climbing to the third place on the table.