ASEAN factory activity slows for three months in a row

Business confidence among manufacturers hit a three-year low.

Southeast Asia’s manufacturing sector started the second half of the year slow as output and new orders remained weak while business confidence dims, latest data from S&P Global showed.

The headline S&P Global ASEAN manufacturing purchasing managers’ index (PMI) slipped further to 50.8 last month from 51 in June, signalling the third consecutive month of slowdown and the sector’s weakest improvement since December.

Only four of the seven economies studied reported better operating conditions last month with a PMI above the neutral 50 mark. A reading below the threshold indicates deterioration.

Indonesia took the top spot with a 10-month high PMI of 53.3 last month, zooming past Thailand, the previous leader, whose reading fell sharply to 50.7 from a record high April.

Factory activity in the Philippines bounced back stronger in July (51.9) after reaching an 11-month low in June, while Myanmar also recovered with a 51.1 PMI from a five-month low the month prior.

Singapore posted its first deterioration in four months with a 48.5 reading in July, joining Vietnam (48.7) and Malaysia (47.8) in the contraction territory.

Across the region, demand for ASEAN manufactured goods rose at a weaker rate in July compared to the month prior as new orders from overseas dropped sharply, leaving the local markets to drive sales according to the closely-watched survey.

Manufacturers’ purchasing activity also fell to its weakest so far this year, although stocks of finished products have consistently been depleted for the third straight month as goods were shipped out fast.

Supply chain pressures eased for the fifth straight month in July, although input prices continued to increase albeit at a softer pace compared to recent months.

The sector was still reporting staff cuts last month but the rate of job shedding was considered marginal overall, according to S&P.

Manufacturers’ outlook for the next 12 months weakened further to its lowest in three years on concerns over the gloomy global economic environment.

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