ASIA: ASEAN Sees Mixed But Steady Manufacturing Growth
Despite Indonesian manufacturing contracting for the first time in almost three years, the July S&P Global ASEAN PMI was relatively stable at 51.6 indicating moderate industrial growth in the region with Vietnam and Thailand outperforming. Orders growth rose but was domestically-driven as export orders fell again with shipping having an impact. The outlook improved for the seventh straight month though. However, cost inflation picked up and was passed on with output inflation rising again, which central banks will monitor closely as they contemplate easing.
- Indonesia’s manufacturing PMI fell to 49.3 from 50.7, signalling a contraction in activity driven by falling output and orders and a resultant drop in employment. The contraction in exports improved moderately but it seems the weakness is due to shipping delays. The problems in the Red Sea also impacted inputs. Cost inflation saw some improvement in July but the previous rise due to rupiah depreciation and higher commodity prices resulted in output inflation rising. Confidence in the outlook for sales and market conditions improved.
- In contrast, Thailand saw the PMI improve to 52.8 from 51.7, highest since June 2023, with positive new orders growth returning and a subsequent increase in output and employment. Orders growth was also above trend. Cost inflation fell again but selling inflation remained above the pre-Covid average. Producers remain optimistic.
- The Philippines was another country driving regional output growth with the PMI steady at 51.2 as domestic demand improved, but slowed from overseas, and employment grew. Even though input inflation rose to a 5-month high, selling prices grew at a slower rate. The Philippines also reported shipping problems due to port congestion. Output is cautiously expected to improve over the year ahead.
Source: MNI - Market News/Bloomberg
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