Philippine bucks downturn in Asean factory activity in Aug

Despite a modest improvement in manufacturing conditions in August, the Philippines led the recovery in business conditions in the ASEAN region during the month, according to the IHS Markit ASEAN Manufacturing Purchasing Managers’ Index (PMI).

Operating conditions in ASEAN manufacturing firms deteriorated at the fastest pace since November 2015 in August as output, new orders and purchasing activity registered declines.

The headline PMI fell further into contraction territory to 48.9 in August from 49.5 in July. A reading above 50 indicates improving business conditions while that below 50 indicates contraction.

The headline PMI provides a quick overview of the health of the manufacturing sector based on the weighted average of five indicators: new orders (30 percent weight), output (25 percent weight), job creation (20 percent), supplier delivery times (15 percent), and inventories (10 percent)

Contributing to the decline were the moderate reduction in new orders and a second consecutive month of reduction in output.

August also marked the strongest fall in external demand since November 2015, weighing heavily on new orders.

Three out of the seven monitored countries in the region, registered solid deterioration in manufacturing conditions.

Singapore reported a sharp downturn in business conditions as seen in the August PMI reading of 42.9, the lowest in series history. Malaysia also posted a contractionary reading of 47.4, its lowest since March.

Indonesia likewise stayed in contractionary territory with a PMI reading of 49, its lowest reading since July 2017.

Those that stayed within expansionary territory were Thailand (PMI reading of 50), Vietnam (PMI reading of 51.4), Philippines (PMI reading of 51.9) and Myanmar (PMI reading of 52).

On Monday, IHS Markit reported that the headline PMI for Philippine manufacturing fell to 51.9 in August, down slightly from 52.1 in July, but is still one of the highest readings recorded this year.

“The Philippines reported one of the fastest improvements in operating conditions in 2019 so far,” the market intelligence firm said in the report.

Subdued demand and output led to the fastest fall in input buying activity also since November 2015.

Alongside slower activity, firms in contraction territory hired fewer workers for the third month in a row.

Only the Philippines recorded the strongest staffing levels in August.

On the price front, ASEAN manufacturers reported muted inflationary pressures in August with input costs rising marginally from July.

Despite this, expectations regarding output in the future remained generally upbeat in August.