Philippines manufacturing leads ASEAN in growth

MANILA, Philippines — The Philippine manufacturing sector outperformed those in ASEAN despite registering a slower expansion in January, according to the latest Nikkei ASEAN Manufacturing Purchasing Managers’ Index (PMI).

Regional manufacturing activity was off to a sluggish start this year as ASEAN manufacturers reported a reduction in output amid weak exports, said IHS Markit, the firm that collected data for the PMI.

The headline manufacturing PMI for ASEAN slipped to 49.7 in January from 50.3 in December, with six out of seven monitored countries reporting lower PMI readings.

The latest index indicates weaker business conditions as a reading of 50 and above indicates expansion and improvement in business conditions.

The index provides a quick assessment of the health of the manufacturing sector based on five indicators: new orders, output, employment, inventories and delivery times.

Country rankings show the Philippines having the highest PMI reading of 52.3 in January despite registering a slower expansion in output from December.

Following the lead were Vietnam and Myanmar, both of which registered a PMI reading of 51.9, and Thailand, which registered a reading of 50.2 in January.

Indonesia, Malaysia and Singapore reported weakening manufacturing conditions as seen in PMI readings of 49.9, 47.9 and 45.6, respectively.

Philippine manufacturing registered a moderate improvement in business conditions in January as reflected in a slower PMI reading from 53.2 in December. Output expanded steadily but at a softer pace and strong domestic demand offset the persistent weakness in exports.

Manufacturing activity within ASEAN weakened amid the decline in export sales for the sixth consecutive month. Among the countries surveyed, only Thailand and Vietnam continued to register growth in new orders abroad.

Firms responded to weaker overseas demand by lowering input purchasing and reducing inventory levels in January.

Companies also hired fewer workers after several months of active hiring. Businesses that reported lower staffing levels cited reduced production requirements as well as resignations. Vietnam recorded the strongest growth in workforce, while Singapore recorded the sharpest decline.

“ASEAN countries struggled at the beginning of 2019, as manufacturers saw new orders fall and output growth moderate from December. Export demand was still a key factor weighing on the sector’s performance, as trade tensions around the world caused export orders to fall for the sixth month running,” said IHS Markit economist David Owen.

Amid slower global demand growth in the regional manufacturing sector would receive a boost from increases in domestic spending as inflationary pressures ease, he said.

“At the same time, the slowdown has led to an easing in inflationary pressures, with the rate of cost inflation at a fresh survey low in January. While this is likely to ease pressure on margins, particularly after steep increases in costs through 2018, it is likely that new orders will remain sparse without a boost to domestic spending or a recovery in foreign demand,” Owen said.