ASEAN factory activity dips for first time in two years

Malaysia was hit hardest last month while conditions continued to improve in Indonesia.

The overall health of Southeast Asia’s manufacturing sector has deteriorated for the first time in 25 months in September, according to S&P Global. 

S&P’s latest industry survey showed the ASEAN manufacturing purchasing managers’ index (PMI) fell to 49.6 last month from 51 in August, indicating “renewed deterioration” for the sector since October 2021. 

Among the seven countries tracked, four economies recorded contraction with a PMI lower than the neutral mark 50.0, led by Malaysia’s 46.8 reading. Singapore (47.3), Thailand (47.8) and Vietnam (49.7) all recorded deteriorating manufacturing conditions last month.

Indonesia, meanwhile, topped the ranking with a 52.3 PMI, although even its September reading was at its four-month low. Myanmar and the Philippines both recorded marginal improvements with their respective PMIs settling at 50.1 and 50.6.

S&P traced the region’s downturn last month to lower new orders which snapped an eight-month growth streak this year. Production also slowed to its weakest pace in two years, prompting manufacturers to trim their workforce.

Companies also eased on their purchasing activity last month, causing their pre-production stocks to be depleted for the first time in six months, while they face heavier cost burdens with input prices rising fast.

“With confidence across ASEAN manufacturers remaining subdued by historical standards amid concerns over the wider global economic climate, the data point to further downside risks for the sector going forward,” said Maryam Baluch, economist at S&P Global Market Intelligence.