Southeast Asian manufacturing ends 2025 strongest quarter in 4 years

The solid growth continues despite slight moderation in output and new orders.

The ASEAN manufacturing sector closed out 2025 in remarkably strong form, recording its best quarterly performance in four years as solid expansion continued across the region despite some signs of easing momentum.

The S&P Global ASEAN Manufacturing Purchasing Managers' Index (PMI) signalled expansion of the sector for a sixth consecutive month in December. Whilst the headline reading dipped slightly from 53.0 in November to 52.7, it still reflected sustained and solid improvement in operating conditions. Notably, the index ranked amongst the highest on record.

The ASEAN region comprises Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, which together account for 98 per cent of the economic bloc's manufacturing value added.

Output and new orders remain robust

Driving the recent monthly improvement, firms reported strong, but slightly moderated increases in both output and new orders. The sustained strength in domestic demand has underpinned the sector's resilience throughout the final quarter of the year.

However, the downturn in new export orders persisted, though it softened slightly in December, suggesting international trade conditions remain challenging for the region's manufacturers.

Purchasing managers maintained their focus on sourcing raw materials and semi-manufactured goods, with buying activity rising for the fifth consecutive month in December. The pace of growth was solid and the strongest in over two and a half years.

Employment has now grown on a monthly basis since September. The rate of job creation was modest but the fastest since February, indicating growing confidence amongst manufacturers about future demand.

Firms reported longer average supplier lead times for a fourth consecutive month in December. Tight supply chains, muted jobs growth and increased new business also led to further backlog accumulation. The rate of increase was solid but softer than the previous month's survey record.

The persistent accumulation of outstanding orders provides companies with additional scope to expand their workforce numbers in the months ahead, suggesting the employment trend may strengthen further in early 2026.

Input costs rose sharply, with inflation broadly matching the pace seen in November. Output charge inflation was unchanged and remained modest. Both price gauges were weaker than their respective historical averages, providing some relief to manufacturers managing margin pressures.

ASEAN manufacturers were optimistic regarding the 12-month outlook for output. In fact, sentiment was at a ten-month high. The degree of confidence has improved further since October, moving towards the long-run survey average.

Maryam Baluch, Economist at S&P Global Market Intelligence, said: "The latest data indicated that the ASEAN manufacturing sector ended 2025 on notably strong footing. December's sustained performance contributed to the strongest quarterly results in four years. However, there were signs that momentum is moderating, with output and new orders increasing at slightly softer rates. Despite this, growth remained robust overall, prompting firms to expand both purchasing and hiring activity.

"Additionally, capacity pressures continued to build, as evidenced by a further solid rise in backlogs of work. This persistent accumulation of outstanding orders provides companies with additional scope to expand their workforce numbers in the months ahead. Moreover, price pressures remained historically subdued, and confidence in the outlook for the year ahead also strengthened to a ten-month high. Collectively, these developments suggest that the manufacturing sector is well-positioned as it heads into 2026."

The data paint a picture of a regional manufacturing sector entering the new year on solid foundations, with strong fundamentals and rising confidence offsetting concerns about moderating momentum and weak export demand. The combination of capacity pressures, hiring intentions and improving sentiment suggests ASEAN manufacturers are preparing for sustained growth in 2026.