Asean manufacturing condition remain challenging

CONDITIONS in the ASEAN manufacturing sector remained challenging in October with further reductions in factory production, and new orders were primarily responsible for the overall deterioration in conditions.

However, rates of decline were not as marked as those seen in September, IHS Markit said in a statement today.

It said four of the seven constituent countries registered a deterioration in conditions during October, with Myanmar recording the sharpest contraction whereby the headline index dropped to a near-record low (30.6) and signalled a rapid deterioration in the health of the sector.

“Data is yet to provide signs of such a recovery, and with further COVID-19-related restrictions being implemented around the world, ‘second lockdowns’ may further hinder any move towards an economic rebound,” IHS Markit economist Lewis Cooper said.

Malaysia saw a quicker rate of contraction, although at 48.5, the headline figure signalled only a mild deterioration in conditions overall.

Its neighbour, Indonesia, deteriorated for the second month running. Its headline index (47.8) was indicative of a moderate decline, albeit one that is softer than in September.

The research firm also said that the latest data highlighted further signs of weak capacity pressures as backlogs declined again.

“As a result, job shedding continued, with the pace of reduction in staff numbers little changed on the month and sharp overall,” it said.

Amid weak client demand, firms continued to pare back on their purchasing activity during the month.

“The latest reduction was the softest since February but still solid. Supply chain disruptions continued, however, with average lead times for inputs lengthening to a greater extent than in September,” noted IHS Markit.

Profit margins came under further pressure, as input prices rose at a quicker rate than in September and solidly overall, while average charges fell again.

“Looking ahead, firms remained confident that output would rise over the year ahead in October. Sentiment was the highest since January and only slightly below the long-run series average,” it said. – Nov 3, 2020



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