ASEAN manufacturing PMI slips to 48.6, sharpest decline since 2021

The ASEAN manufacturing sector slipped into contraction at the start of the second quarter, with the following months signalling further deteriorations in operating conditions. In fact, June marked the most worsening in the health of the sector since August 2021. A sharper decrease in new orders was accompanied by more substantial cuts to staffing levels and purchasing activity.

Although production was also reduced, this was only marginal. Furthermore, despite a strongly optimistic outlook for output in the year ahead, confidence slightly waned since May and was historically subdued. This suggests a continuation of the lacklustre performance of the ASEAN manufacturing sector, S&P Global said in a press release.

Both new orders and output remained in contraction territory since April. Recent figures revealed a sharper decline in incoming new orders for ASEAN goods producers, marking the most significant drop since August 2021.

The overall new orders landscape was once again hampered by declining foreign demand for ASEAN goods, which continued to worsen. In fact, the rate of decrease in new export orders was solid and the most pronounced in eight months. Meanwhile, the downturn in production remained shallow, with the rate of decrease consistent with that observed in May.

Manufacturing companies across ASEAN aligned their purchasing of inputs and employment in line with the deteriorating demand picture. Both measures recorded steeper contractions, with payroll numbers being reduced to the greatest extent since October 2021.

The latest ASEAN manufacturing performance was coupled with historically muted inflationary pressures. The rate of input price inflation softened further since May, to indicate only a modest increase in cost burdens, which was the slowest in just over five years. Although the pace of charge inflation accelerated during the month, manufacturers raised their prices only marginally, added the release.

While goods producers were optimistic about an increase in output over the coming year, the overall degree of optimism diminished and was historically subdued. Sentiment is currently the second-least optimistic since July 2020, suggesting a muted manufacturing performance in the year ahead.

“The ASEAN manufacturing sector concluded the first half of the year on a worrying note, with the headline index dropping to a 46-month low. Production continued to contract, and new orders, purchasing activity, and employment all experienced sharper declines. Although subdued inflationary pressures may partially assist the sector in reviving sales, the current downside risks stemming from ongoing international tensions and tariff-related announcements inject uncertainty into the outlook for the year ahead,” said Maryam Baluch, economist at S&P Global Market Intelligence.

ALCHEMPro News Desk (SG)