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Asean PMI stabilised in November, ending eight-month downturn — IHS Markit

Asean PMI stabilised in November, ending eight-month downturn — IHS Markit

01 Dec 2020

Asean manufacturing conditions stabilised in November, ending an eight-month-long downturn, according to the latest IHS Markit Purchasing Managers’ Index (PMI).

In a note, IHS Markit shared that regional output rose for the first time since January, at the quickest rate in nearly two and a half years, amid renewed expansion of order book volumes. Consequently, job losses were the softest in nine months.

November’s PMI stood at 50.0 from 48.6 in October, signalling stabilisation in the health of the Asian manufacturing sector.

IHS Markit noted that the upward movement in the headline PMI was the first expansion in factory production since the start of the year, with the quickest rate of growth since June 2018. Additionally, there was a renewed increase in new orders. However, the rate of growth in order book volumes was only fractional, weighed on by a further, albeit slower, drop in export orders.

It also noted that firms continued to pare back on their staff numbers, extending the current sequence of falling unemployment to a year and a half. That being said, job cuts were the least widespread since February. Capacity pressure remained weak as the level of outstanding business fell, while the rate of backlog depletion was little changed in November and moderate.

Client demand had also yet to improve at any substantial rate, with companies continuing to cut back on purchasing activity in November. Covid-19 measures led to further supply chain disruption as input lead times increased to the greatest level since August. However, delays were not as severe as those seen at the height of the lockdown measures implemented earlier this year.

Cost inflation was the quickest since August, with firms in the region increasing their average charges for the first time in three months. Asean goods producers continued to remain optimistic with regard to output. That said, the level of positive sentiment dipped slightly from October and was subdued in the context of historical data.

IHS Markit economist Lewis Cooper opined that November’s data provided a small glimmer of positivity when it came to the regional manufacturing sector.

“At 50.0 in November, the headline figure signalled stable conditions on the month, merely highlighting that things were no worse than in October. Although this is welcome news in some sense and brings the eight-month-long downturn to an end, there remains a substantial amount of ground to make up following the sizeable economic hit caused by the pandemic.

“Moreover, with cases rising across the globe, and some Asean constituent countries enforcing tougher lockdowns, we may well see conditions deteriorate again if client demand is stifled by measures and factories ease back on production.

“Nonetheless, things are beginning to move in the right direction, with the latest data providing a tentative sign that the manufacturing sector may be turning towards a recovery. Heightened uncertainty continues to cloud the outlook, however, and nothing is certain,” Cooper said.

Singapore registered the strongest upturn, with the city state’s headline PMI standing at 51.7, while Thailand was at 50.4 and Indonesia was at 50.6. Malaysia recorded a fourth consecutive contraction, with a PMI of 48.4.

Source: The Edge Markets

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