South-east Asia manufacturing output posts first fall in 2 years

South-east Asia manufacturing output posts first fall in 2 years

South-east Asian manufacturing conditions worsened for a second consecutive month according to a private gauge, with factory output falling for the first time in two years as the region’s economy slows in response to trade friction and weak global demand. 

The Nikkei-Markit manufacturing purchasing managers’ index for Asean countries fell to 49.5 in July, down from 49.7 in June, and remaining below the 50 mark that separates contraction from growth.

A slight decrease in overall output, the first such fall since July 2017, contributed to the headline decline, with only a marginal increase in new orders for manufacturers in the bloc. 

The manufacturing sector in Indonesia, Asean’s largest economy, slipped into decline for the first time in six months, with worker numbers reduced at their fastest pace in 19 months. Conditions in Malaysia and Singapore continued to deteriorate, although the pace of the latter’s decline moderated in June. 

“The Asean manufacturing sector remained in decline in July, according to the latest PMI survey data. In fact, the rate of deterioration was the steepest in two years, driven by lower output and employment”, said David Owen, economist at IHS Markit. 

“As such, manufacturers appear in a difficult position, and require stronger demand growth to lift them out of the current soft patch.”

Manufacturers across south-east Asia have been hit by slowing overseas demand and the impact of trade tensions between the US and China, which have disrupted supply chains across the region. 

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