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Asean factories buck COVID-19 disruption; Philippines outperforms in February
MANILA, Philippines — The ASEAN manufacturing sector has so far survived the disruption caused by the spread of the coronavirus disease 2019 (COVID-19), returning to expansionary territory in February after eight months of deterioration, according to the new IHS Markit ASEAN Purchasing Managers’ Index (PMI).
The headline PMI for ASEAN manufacturing rose to 50.2 in February from 49.8 in January, indicating a marginal improvement in the health of the sector in nine months as new orders increased at the fastest pace since May. This reading remains only slightly above the expansionary territory as a reading of 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).
Drops in output and employment weighed on the headline figure as production declined for the first time since November and hiring fell at the fastest pace in three months.
Among the seven monitored countries in the region, the Philippine manufacturing sector had the fastest improvement, registering a headline PMI reading of 52.3 in February from 52.1 in January, the highest in 13 months.
Indonesia also registered an expansion, the first in eight months, with the headline figure (51.9) indicative of a modest uptick.
Meanwhile, Myanmar, Thailand, Vietnam, Malaysia and Singapore had weaker PMI readings of below 50.
“The ASEAN manufacturing sector saw a tentative improvement in conditions in February, ending an eight month sequence of deterioration. A third consecutive increase in order book volumes was partly responsible, although new business rose only mildly overall,” said Lewis Cooper, economist at IHS Markit.
Despite the increase in new order, Cooper said slower purchasing and delivery of inputs as a result of the disruption caused by COVID-19 may affect the momentum of recovery for the manufacturing sector in ASEAN.
“Meanwhile, firms continued to pare back their buying activity and inventories, while vendor performance deteriorated at the quickest rate since August 2014 amid reports of supply chain disruptions stemming from the COVID-19 outbreak,” he said.
“The lack of output growth so far this year, coupled with renewed supply chain pressures, adds to concerns over whether the health of the sector can improve further. Next months data will provide a further indication of the effect of the coronavirus outbreak on ASEAN goods producers.”
On the price front, cost burdens to ASEAN manufacturers continued to rise at the fastest pace since May but these were not passed on to clients as indicated by the broadly stagnant growth in selling prices of goods.
Firms remained, on average, maintain a positive outlook that output will increase in the coming year but the level of optimism slipped to a four-month low.
Source: https://www.philstar.com/business/2020/03/04/1997868/asean-factories-buck-covid-19-disruption-philippines-outperforms-february