COVID-19: Asean manufacturing index plummets

Southeast Asian manufacturers felt the brunt of the coronavirus pandemic in March, with the Asean manufacturing purchasing managers’ index (PMI) plunging to an all-time low as operating conditions worsened at the fastest pace since the survey started in July 2012, according to IHS Markit.

The headline PMI fell from 50.2 in February to 43.4 in March, to signal a renewed deterioration in the health of the ASEAN manufacturing sector. Moreover, the figure was the lowest in the survey’s near eight-year history and indicative of a marked downturn. All of the survey indicators hit a record low, with substantial rates of decline reported for output and total new orders.

Commenting on the survey results, Lewis Cooper, economist at IHS Markit, said: “ASEAN manufacturers felt the full force of the coronavirus pandemic in March. The headline PMI dropped to the lowest in the survey’s near eight-year history, amid record contractions of output, new orders, inventories and employment.”

”Notably, March was the first time on record that all of the seven constituent countries posted a deterioration in the health of their respective manufacturing sectors simultaneously.”

”Restrictive measures stemming from efforts to contain the COVID-19 outbreak and substantial uncertainty surrounding the outlook also eroded firms output expectations during March. Sentiment was the lowest since the series began in mid-2012, although firms still remain, on average, optimistic output will increase over the next 12 months.”

“Overall, March highlighted the worst performance of the ASEAN manufacturing sector on record, as repercussions from the COVID-19 pandemic are realised, and indeed it is likely that they will be felt for several months to come, if not longer.”

At the country level, deteriorations were reported in each of the seven constituent countries. The downturn was most marked in Singapore, with the headline figure slipping a record 18.1 points from February to 27.7, the lowest in the series near eight-year history.

The Philippines also registered a deterioration in March, with the headline index (39.7) posting below the 50.0 no-change mark for the first time since the survey began January 2016.

Elsewhere, Vietnam recorded a back-to-back contraction, with the headline index falling to the lowest on record at 41.9 in March, and signalling a steep decline in the health of the manufacturing sector. Similarly, Myanmar registered a deterioration in operating conditions for the second month running. 

Overall, operating conditions across the ASEAN manufacturing sector deteriorated markedly in March, with survey record rates of decline in output and new orders primarily driving the downturn. Factory production declined at the quickest pace since the survey began in mid-2012, while Incoming new business also fell at a record rate, as the impact of shutdowns and emergency measures globally to tackle the COVID-19 pandemic led to a collapse of client demand and disrupted supply chains.

New export orders were also hit hard, with the rate of decline the quickest on record. In line with lower production requirements and weaker demand conditions, ASEAN goods producers reduced workforce numbers again in March, with the pace of job shedding accelerating to a solid rate.

Furthermore, there was evidence of spare capacity in March with outstanding business falling for the ninth month running. The rate of backlog depletion was the sharpest on record.

Meanwhile, firms pared back on buying activity in March, with the decline the quickest in the series near eight-year history. Inventories also declined substantially, while delivery times lengthened sharply amid greater supply chain pressures.

Firms output expectations for the coming year weakened notably during March. Although firms were generally still optimistic that output would increase, the level of positive sentiment was the lowest in the series history.

Price pressures eased in March, with average input costs falling for the first time in the survey’s history while selling prices declined at a record pace.