R.O.W PMI

 

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“Let’s agree that I am a dumb shit but I still need to make sense of this, so let’s move slowly to make sure that happens.”

Excerpt From: Ray Dalio. “Principles.”

Nikkei ASEAN Manufacturing PMI™ 

Key Points 

  • Slower rises in output and new orders drag on headline PMI.
  • ASEAN employment broadly stagnates.
  • Business confidence at lowest in survey history.

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Manufacturing operating conditions across ASEAN were broadly unchanged at the end of the first quarter, according to the Nikkei ASEAN Manufacturing Purchasing Managers’ Index (PMI™), which slipped from 50.7 in February to 50.1 in March.

Slower rises in both output and new order volumes, alongside inventory depletion and largely stagnant employment, were key factors weighing on the headline reading.

March data pointed to mixed manufacturing sector performances across the monitored ASEAN nations. Four of the seven countries covered by the survey indicated an improvement in business conditions, down from five in the first two months of 2018.

Myanmar displaced Vietnam to lead the ASEAN manufacturing rankings, as growth in its manufacturing sector picked up to a solid pace. Vietnam slipped to the second position, having registered a slower improvement in operating conditions, while the Philippines climbed to third place as adverse effects on demand from recent tax reforms showed sign of fading.

Indonesia saw slower growth in its manufacturing economy while Malaysia reported weaker business conditions. Thai manufacturers signaled a deterioration in operating conditions for the first time since October. Singapore remained in contraction, though the rate of deterioration was the slowest seen for five months.

Overall, client demand softened across the region at the end of the first quarter. This was despite a renewed rise in foreign sales, suggesting that lower domestic demand was a key reason for slower growth in total new business. However, the rate of expansion in export sales was only marginal.

Softer demand conditions coincided with a slower increase in production across the region. The rate of output growth weakened from February and as only slight.

There were also signs of spare capacity within the ASEAN manufacturing sector, which weighed on hiring. Backlogs of unfinished work continued to fall in March, stretching the current trend to over three-and-a-half years.

Weaker increases in production and new order intakes led businesses to be cautious about hiring and inventory management. Staff numbers were broadly unchanged in March, following two months of expansion. Growth in purchasing activity also slowed from February. Concurrently, inventories of both purchases and finished goods declined further.

Vendor performance deteriorated slightly in March following a brief improvement in February. However, the degree to which lead times lengthened was only slight. In many cases across the region, there were reports of supply shortages in certain raw material such as industrial metals, chemicals, and paper.

ASEAN manufacturers continued to face higher input costs, which led some firms to pass on some of the increase to customers. However, subdued demand conditions limited the extent to which firms could raise their selling prices.

Input cost inflation remained marked in March, with the pace of increase accelerating to the greatest for akmost a year. Inflation remained strongest in the Philippines as new excise taxes worked their way through to higher input prices. Myanmar, Indonesia, Malaysia and Singapore all saw a faster increase in input costs. Vietnam meanwhile reported a softer, albeit still steep, increase in cost burdens.

In response to increased costs, all covered nations registered high selling prices, led by the Philippines.

Finally, business confidence regarding output in the next 12 months remained positive but slipped to the lowest in survey history.

 

Nikkei Indonesia Manufacturing PMI™ 

Kep Points 

  • Headline PMI falls to 50.7 in March.
  • Output and new orders both rise at slower rates.
  • Business confidence hits the lowest level since December 2012.

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Operating conditions across Indonesia’s manufacturing sector improved further in March, but at a softer pace. Notably, latest data signaled softer expansions in both output and new orders. Nevertheless, firms increased their staffing levels again in response to increased new order volumes. Meanwhile, cost pressures intensified with input prices rising to the sharpest extent since October 2015, while output charges rose at a slower pace.

The headline seasonally adjusted Nikkei Indonesia Manufacturing Purchasing Managers’ Index(PMI™) fell from February’s 20-month high of 51.4 to 50.7 in March. Although the improvement in business conditions was only marginal the latest PMI reading remained above the long-run average.

A back-to-back monthly increase in new business was observed during March. Improved domestic demand contributed to higher sales, according to panellists. In line with the trend for production, however, the rate of expansion was only slight.

In contrast, new export orders declined for the fourth consecutive month. There were reports from panellists that uncompetitive prices weighed on demand from international markets.

In response to greater production requirements, firms raised their staffing levels in March. However, the pace of job creation softened since February and was marginal.

Alongside higher employment, firms raised their purchasing activity to support output growth, albeit only slightly. Meanwhile, stocks of both finished goods and purchased items declined at the end of the first quarter.

Amid reports of raw material shortages across Indonesia’s supply chain, average vendor performance deteriorated in March. However, the rate at which average lead times lengthened was only modest overall.

Input prices rose in March, thereby continuing the trend that has defined this series so far. Survey panellists reported that currency weakness relative to the US dollar continued to contribute to higher costs. Moreover, the rate of inflation accelerated to the sharpest since October 2015. Firms generally passed on higher cost burdens to clients by raising their output prices in March. However, charges increased at only a modest pace, to suggest that firms’ margins remained under pressure.

Although manufacturers remained optimistic towards the 12-month outlook for output, the level of positive sentiment was the weakest since December 2012.

 

Nikkei Japan Manufacturing PMI™ 

Key Points

  • Output and new order growth weakens.
  • Firms hire new staff amid capacity constraints.
  • Output prices rise at historically marked pace.

 

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The health of the Japanese manufacturing sector continued to improve during March, albeit to a softer extent. Nonetheless, expansionary trends were sustained in both output and new orders, encouraging firms to raise employment and input buying. Capacity pressures remained elevated, as firms noted higher levels of unfinished work and longer supplier lead times. Reports of supply shortages and strong input demand coincided with a stronger increase in average costs. In turn, firms raised output charges to a relatively sharp extent.

The headline Nikkei Japan Manufacturing Purchasing Managers’ IndexTM (PMI)® – a composite single-figure indicator of manufacturing performance – fell to 53.1 in March, from 54.1 in February to signal a solid, albeit weaker, improvement in operating conditions for Japanese manufacturers. That said, the headline PMI has recorded in expansionary territory for 19 successive months.

Japanese goods producers increased output for a twentieth successive month during March. Anecdotal evidence suggested that favourable order receipts had prompted them to increase production. That said, the rate of growth eased to an eight-month low. Similarly, new business expanded at a softer rate during the latest survey period. Nevertheless, the pace of growth was broadly in line with the average seen across the current 18-month sequence of rising demand. Firms attributed higher new orders to new customer wins and product launches. Sales to overseas clients also rose during March. Panellists noted Europe, China, and South Korea as destinations for export orders.

As a result of increased incoming new business, capacity pressures were tested across the Japanese manufacturing sector. Backlogs of work rose, with production lines incapable of meeting demand requirements. Consequently, firms completed orders using their stocks of finished goods. To help clear outstanding work, businesses recruited additional staff in March. That said, the rate of job creation slowed to a three-month low.

Survey data also signaled that the sustained upturn in demand had impacted supply chains. Average lead times for inputs lengthened markedly in March and to the sharpest extent since May 2011. This encouraged businesses to bolster their holdings of raw materials and semi-manufactured goods. Input stocks increased for a third successive month.

Operating expenses faced by Japanese manufacturers rose sharply during March. Higher prices for food, fuel, and metals were reported by panelists. In an effort to guard against profit margin erosion, businesses raised selling prices. The rate of output price inflation accelerated to the second- fastest pace since October 2008.

Firms maintained a positive outlook regarding output over the forthcoming year. Survey respondents attributed their upbeat expectations to new marketing initiatives, Olympic Games-related opportunities and the development of new products.

 

Nikkei Malaysia Manufacturing PMI™ 

Key Points 

  • PMI falls to five-month low of 49,5 in March.
  • Output declines for first time in eight months…
  • ….Driven by lower volumes of new business.

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March data pointed to a deterioration in conditions in the Malaysian manufacturing sector at the end of the first quarter. Moreover, production fell for the first time in eight months, while new orders continued to decline during March. Reflecting poor demand conditions, firms continued to decrease their purchasing activity and pre-production inventories. On the price front, price pressures continued to escalate, with both input and output prices rising at faster rates.

The headline Nikkei Malaysia Manufacturing Purchasing Managers’ IndexTM (PMI®) – a composite single-figure indicator of manufacturing performance – fell from 49.9 in February to 49.5 in March. This was consistent with a marginal deterioration in operating conditions. The latest figure was broadly in line with the long-run series average (49.4) since July 2012.

Central to the downward movement in the headline PMI was a fall in manufacturing production for the first time in eight months. Panellists widely associated falls in output with lower order book volumes. That said, the rate of contraction was marginal.

The poor performance in the sector was also driven by a decline in new business placed at Malaysian manufacturing firms. Weak underlying demand was the key factor behind lower volumes of new work, according to panellists. However, the rate of contraction was only marginal overall.

Amid reports of lower demand from international markets, new export orders declined for the second consecutive month in March. The rate of contraction accelerated since February but remained modest.

There was evidence of ongoing spare operating capacity as outstanding business declined for the tenth consecutive month. Lacklustre demand was the main reason behind lower work-in-hand, according to panellists. Meanwhile, manufacturers raised their staffing levels, albeit at a fractional pace.

Reflecting subdued demand conditions, firms decreased their purchasing activity at a solid pace. As a result, pre-production inventories fell for the fourth month running.

Malaysia’s manufacturing sector faced higher cost pressures at the end of the quarter. Moreover, input cost inflation intensified to the sharpest in 2018 so far. Higher cost burdens were attributed by panellists to a general rise in raw materials.

Average selling prices rose in March, thereby extending the current sequence of inflation to nearly one-and-a-half years. According to panellists, higher selling prices reflected the pass-through of higher input costs to clients. However, factory gate charges only increased at a modest pace, to suggest that firms’ margins remained under pressure.

Entry into new markets, more projects and expected improvements in demand supported optimism among manufacturers that output will increase over the coming 12 months. However, the level of positive sentiment eased to the weakest in 2018 so far and was slightly weaker than the series average.

 

Nikkei Myanmar Manufacturing PMI™ 

Key Points

  • PMI increases to signal strong improvement in manufacturing conditions.
  • Output and new order growth fastest in short series history…
  • … but business confidence remains subdued.

 

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March survey data indicated a strong improvement in operating conditions across Myanmar’s manufacturing sector. The overall upturn was supported by steep increases in output and new orders, with both rates of growth reaching series peaks. Although backlogs continued to contract, job creation accelerated and was the fastest since May 2017. Meanwhile, despite a greater improvement in business conditions, output expectations for the year-ahead remained muted in the context of the short series history.

At 53.7, the headline Nikkei Myanmar Manufacturing Purchasing Managers IndexTM (PMITM) – a composite single figure indicator of manufacturing performance – was up from 52.6 posted in February. Moreover, the latest PMI reading was the highest since the survey began in December 2015. In addition, the average for the first quarter of 2018 signalled the quickest expansion over a three-month period in the survey history.

Output levels across Myanmar’s manufacturing sector expanded at the fastest pace in the short series history in March. Moreover, the growth rate accelerated for the third successive month to a steep pace. Anecdotal evidence linked the rise to greater demand from current clients and the acquisition of new customers.

In line with stronger client demand, new orders received by goods producers increased for the seventh consecutive month in March. Moreover, the pace of expansion quickened to a sharp rate and reached a series peak. Panellists stated that increased new orders stemmed from greater demand from clients, particularly those in the construction sector.

Meanwhile, employment growth accelerated slightly to its quickest since May 2017. Faster job creation was commonly attributed to greater production requirements. That said, the level of outstanding business at manufacturers continued to contract. Although backlogs fell at the weakest pace since July 2016, the decline was marked overall.

On the price front, the pace of input cost inflation quickened slightly from that seen in February, and was marked overall. Anecdotal evidence suggested that larger cost burdens were driven by higher raw material prices. In contrast, the rate of output charge inflation softened to a six-month low. Where an increase was reported, panellists linked this to greater cost burdens.

In addition, increased strain on capacity at suppliers led to the greatest extension in supplier delivery times since December 2016. At the same time, manufacturers reported the first rise in buying activity since May 2017. Moreover, the increase was strong and the fastest in a year.

Finally, business confidence was muted in the context of the short series history in March, despite goods producers signalling the highest degree of optimism in three months. Where positive sentiment was reported, respondents attributed this to improvements in product quality and, in some cases, a greater online advertising presence.

 

Nikkei Philippines Manufacturing PMI™ 

Key Points 

  • Faster rises in both output and new orders.
  • Exports return to growth.
  • Both input and selling prices rise at survey record rates.

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The seasonally adjusted Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMITM) rose from 50.8 in February to 51.5 in March, signalling a further improvement in the health of the sector.

Despite the rise in the index during March, the average PMI reading for the first three months of 2018 was the lowest since the survey’s inception on January 2016. The headline PMI is a composite index designed to provide a quick snapshot of the health of the manufacturing sector each month.

Survey data showed signs of a further strengthening of client demand. Inflows of new business picked up to the greatest in three months, buoyed by rising exports. Overseas sales returned to growth in March following two months of decline. Firmer sales prompted Filipino factories to scale up production. Output growth reached a three-month high.

Increased demand failed to stretch firms’ operating capacity. On the contrary, the level of unfinished work fell further as anecdotal evidence revealed that manufacturers increased over-time work and raised production efficiency.

The ongoing presence of spare capacity weighed on hiring. Lower employment was reported again in March, though the pace of decrease was slower than February. While voluntary leavers were cited as the main reason, some firms mentioned cost- cutting measures and efforts to bolster productivity.

New excise taxes (effective from January) continued to push up inflationary pressures during March. The rate of increase in both input costs and selling prices climbed to the highest in the survey history. Increased global prices for raw materials, in particular steel, chemicals, paper and sugar, as well as a weaker exchange rate also contributed to inflation.

Meanwhile, business expectations remained elevated, with optimism improving to the best since July last year. Firms on balance anticipated higher output in the 12 months ahead, citing reasons such as new product launches, promotional activity, new marketing strategies, improved access to manufacturing inputs, planned business expansions and increased capital investments.

Higher confidence encouraged companies to scale up input buying and accumulate more stocks. Purchasing activity growth was the highest for four months, contributing to a faster rise in stocks of purchases. Finished goods inventories returned to growth, having seen depletions in the previous two months.

 

Caixin China General Manufacturing PMI™ 

Key Points 

  • Out, new orders and export sales all rise at weaker rates.
  • Quicker decline in headcounts.
  • Input price inflation colls to nine-month low.

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Chinese manufacturing companies signalled only a marginal improvement in overall operating conditions at the end of the first quarter. Production and total new orders both expanded at the weakest rates for four months, while export sales increased only marginally. At the same time, staff numbers declined at the quickest pace since last August amid reports of cost- cutting plans. Overall inflationary pressures meanwhile cooled further, with input costs increasing at the slowest rate for nine months, while firms raised their selling prices only modestly. Encouragingly, confidence towards growth prospects improved to a one-year high amid forecasts of greater investment and expectations of better market conditions.

Adjusted for seasonal factors, the headline Purchasing Managers’ IndexTM (PMITM) – a composite indicator designed to provide a single- figure snapshot of operating conditions in the manufacturing economy – posted 51.0 in March, down from 51.6 in February. Although the reading signalled a further improvement in the health of the sector, the latest upturn was only slight and the weakest recorded since last November.

The amount of total new work placed with Chinese manufacturers increased again in March, though the pace of expansion softened to a four-month low. Weaker growth in overall new orders was in part driven by relatively muted foreign demand, as new export work increased only slightly at the end of the first quarter.

Reflective of the trend for new work, production levels rose to the softest extent since last November, and only modestly overall. Concurrently, relatively subdued sales contributed to a marginal increase in inventories of finished items.

Companies continued to reduce staff numbers, with the rate of job shedding quickening slightly to the most marked for seven months. A number of respondents mentioned that efforts to lower costs had been behind the latest drop in employment.

A combination of lower staff and higher order volumes led to a further increase in backlogs of work. Furthermore, the rate of accumulation quickened slightly since February.

Sustained growth in new orders underpinned a further rise in purchasing activity across China’s manufacturing sector. In line with the trend for new orders and output, the rate of growth was the weakest seen for four months. Nonetheless, the rise was sufficient to lead to a further increase in stocks of inputs, albeit one that was marginal.

Environmental inspection policies were cited as the key driver of longer lead times for inputs during March. Vendor performance has now deteriorated for 19 months in a row.

Average input price inflation continued to soften from September’s recent peak, with cost burdens rising to the weakest extent for nine months in March. At the same time, factory gate prices increased only modestly.

Although demand conditions softened slightly, confidence towards the 12-month outlook for production improved to a one-year high in March.

 

Nikkei South Korea Manufacturing PMI™ 

Key Points 

  • Production falls at fastest pace since August 2017.
  • New orders from domestic and overseas clients fall.
  • Firms raise output prices to weaker extent.

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The South Korean manufacturing economy concluded the first quarter of 2018 with a slight deterioration in operating conditions. Output was reduced at the sharpest pace in seven months amid contracting order book volumes. New business declined at the quickest rate in 12 months, while sales to overseas clients fell to a relatively marked extent. Consequently, capacity pressures abated, as less demand enabled firms to clear backlogs of work. On the other hand, lower production requirements discouraged firms from hiring additional staff, with employment levels broadly unchanged.

On the price front, although input costs rose sharply, the rate of inflation eased to a three-month low. In turn, firms raised factory gate charges for a seventh straight month.

The headline Nikkei South Korea Manufacturing Purchasing Managers’ IndexTM (PMI)® – a composite single-figure indicator of manufacturing performance derived from five key survey indices – declined to 49.1 in March, from 50.3 in February. This signalled the most marked deterioration in business conditions for South Korean manufacturers since July 2017.

Output was reduced for the first time since December last year during the latest survey period. Moreover, the pace of contraction was the fastest since August 2017. Anecdotal evidence indicated that the downturn in production was a result of shrinking order book volumes. New business inflows fell in March, thereby ending a nine-month sequence of improving demand. Panellists attributed fewer sales to increased competitiveness and falling export orders. New business from overseas clients declined at the strongest rate in 17 months during the latest survey period. Survey respondents noted weaker demand from China, India, Japan and the US.

Nikkei South Korea Manufacturing PMI months during the latest survey period. Survey respondents noted weaker demand from China, India, Japan and the US.

Consequently, the lack of incoming new business helped abate capacity pressures. Backlogs of work were reduced to the greatest extent since November 2016. Moreover, suppliers’ delivery times shortened for the first time in 18 months during March.

With fewer sales reducing the strain on the production line, employment was broadly unchanged during March. While some panellists hired new staff in anticipation of stronger demand, others mentioned that increased labour costs deterred them from recruiting further.

Operating costs faced by South Korean manufacturers rose sharply during the latest survey period. Anecdotal evidence indicated that raw material prices had increased, including metals and oil. That said, the rate of inflation eased to a three- month low. In turn, output prices were raised to partially offset the squeeze on profit margins. However, the extent of the rise in selling charges was the joint-weakest seen across the current seven-month inflationary sequence.

Overall, businesses remained optimistic towards future output in March. Forecasts of new client wins, improved demand, economic growth and productivity gains were cited as reasons to be confident. That said, the degree of confidence eased to a three-month low.

 

Nikkei Taiwan Manufacturing PMI™ 

Key Points 

  • Slower increases in total new work and employment weight on headline PMI…
  • …but production growth edges up to three-month high.
  • Input prices rise at quickest pace for 14 months.

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The South Korean manufacturing economy concluded the first quarter of 2018 with a slight deterioration in operating conditions. Output was reduced at the sharpest pace in seven months amid contracting order book volumes. New business declined at the quickest rate in 12 months, while sales to overseas clients fell to a relatively marked extent. Consequently, capacity pressures abated, as less demand enabled firms to clear backlogs of work. On the other hand, lower production requirements discouraged firms from hiring additional staff, with employment levels broadly unchanged.

On the price front, although input costs rose sharply, the rate of inflation eased to a three-month low. In turn, firms raised factory gate charges for a seventh straight month.

The headline Nikkei South Korea Manufacturing Purchasing Managers’ IndexTM (PMI)® – a composite single-figure indicator of manufacturing performance derived from five key survey indices – declined to 49.1 in March, from 50.3 in February. This signalled the most marked deterioration in business conditions for South Korean manufacturers since July 2017.

Output was reduced for the first time since December last year during the latest survey period. Moreover, the pace of contraction was the fastest since August 2017. Anecdotal evidence indicated that the downturn in production was a result of shrinking order book volumes. New business inflows fell in March, thereby ending a nine-month sequence of improving demand. Panellists attributed fewer sales to increased competitiveness and falling export orders. New business from overseas clients declined at the strongest rate in 17

Nikkei South Korea Manufacturing PMI months during the latest survey period. Survey respondents noted weaker demand from China, India, Japan and the US.

Consequently, the lack of incoming new business helped abate capacity pressures. Backlogs of work were reduced to the greatest extent since November 2016. Moreover, suppliers’ delivery times shortened for the first time in 18 months during March.

With fewer sales reducing the strain on the production line, employment was broadly unchanged during March. While some panellists hired new staff in anticipation of stronger demand, others mentioned that increased labour costs deterred them from recruiting further.

Operating costs faced by South Korean manufacturers rose sharply during the latest survey period. Anecdotal evidence indicated that raw material prices had increased, including metals and oil. That said, the rate of inflation eased to a three- month low. In turn, output prices were raised to partially offset the squeeze on profit margins. However, the extent of the rise in selling charges was the joint-weakest seen across the current seven-month inflationary sequence.

Overall, businesses remained optimistic towards future output in March. Forecasts of new client wins, improved demand, economic growth and productivity gains were cited as reasons to be confident. That said, the degree of confidence eased to a three-month low.

 

Nikkei Thailand Manufacturing PMI™ 

Key Points

  • Renewed falls in output, new orders and input stocks weight on headline PMI.
  • Slower growth in export sales.
  • Business expectations turn negative for first time in survey history.

 

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Manufacturing operating conditions across ASEAN were broadly unchanged at the end of the first quarter, according to the Nikkei ASEAN Manufacturing Purchasing Managers’ Index (PMI™), which slipped from 50.7 in February to 50.1 in March.

Slower rises in both output and new order volumes, alongside inventory depletion and largely stagnant employment, were key factors weighing on the headline reading.

March data pointed to mixed manufacturing sector performances across the monitored ASEAN nations. Four of the seven countries covered by the survey indicated an improvement in business conditions, down from five in the first two months of 2018.

Myanmar displaced Vietnam to lead the ASEAN manufacturing rankings, as growth in its manufacturing sector picked up to a solid pace. Vietnam slipped to the second position, having registered a slower improvement in operating conditions, while the Philippines climbed to third place as adverse effects on demand from recent tax reforms showed sign of fading.

Indonesia saw slower growth in its manufacturing economy while Malaysia reported weaker business conditions. Thai manufacturers signaled a deterioration in operating conditions for the first time since October. Singapore remained in contraction, though the rate of deterioration was the slowest seen for five months.

Overall, client demand softened across the region at the end of the first quarter. This was despite a renewed rise in foreign sales, suggesting that lower domestic demand was a key reason for slower growth in total new business. However, the rate of expansion in export sales was only marginal.

Softer demand conditions coincided with a slower increase in production across the region. The rate of output growth weakened from February and as only slight.

There were also signs of spare capacity within the ASEAN manufacturing sector, which weighed on hiring. Backlogs of unfinished work continued to fall in March, stretching the current trend to over three-and-a-half years.

Weaker increases in production and new order intakes led businesses to be cautious about hiring and inventory management. Staff numbers were broadly unchanged in March, following two months of expansion. Growth in purchasing activity also slowed from February. Concurrently, inventories of both purchases and finished goods declined further.

Vendor performance deteriorated slightly in March following a brief improvement in February. However, the degree to which lead times lengthened was only slight. In many cases across the region, there were reports of supply shortages in certain raw material such as industrial metals, chemicals, and paper.

ASEAN manufacturers continued to face higher input costs, which led some firms to pass on some of the increase to customers. However, subdued demand conditions limited the extent to which firms could raise their selling prices.

Input cost inflation remained marked in March, with the pace of increase accelerating to the greatest for akmost a year. Inflation remained strongest in the Philippines as new excise taxes worked their way through to higher input prices. Myanmar, Indonesia, Malaysia and Singapore all saw a faster increase in input costs. Vietnam meanwhile reported a softer, albeit still steep, increase in cost burdens.

In response to increased costs, all covered nations registered high selling prices, led by the Philippines.

Finally, business confidence regarding output in the next 12 months remained positive but slipped to the lowest in survey history.

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Nikkei Vietnam Manufacturing PMI™ 

Key Points

  • Weaker rises in output and new orders.
  • New export order growth accelerates.
  • Rates of inflation soften.

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Manufacturing operating conditions across ASEAN were broadly unchanged at the end of the first quarter, according to the Nikkei ASEAN Manufacturing Purchasing Managers’ Index (PMI™), which slipped from 50.7 in February to 50.1 in March.

Slower rises in both output and new order volumes, alongside inventory depletion and largely stagnant employment, were key factors weighing on the headline reading.

March data pointed to mixed manufacturing sector performances across the monitored ASEAN nations. Four of the seven countries covered by the survey indicated an improvement in business conditions, down from five in the first two months of 2018.

Myanmar displaced Vietnam to lead the ASEAN manufacturing rankings, as growth in its manufacturing sector picked up to a solid pace. Vietnam slipped to the second position, having registered a slower improvement in operating conditions, while the Philippines climbed to third place as adverse effects on demand from recent tax reforms showed sign of fading.

Indonesia saw slower growth in its manufacturing economy while Malaysia reported weaker business conditions. Thai manufacturers signaled a deterioration in operating conditions for the first time since October. Singapore remained in contraction, though the rate of deterioration was the slowest seen for five months.

Overall, client demand softened across the region at the end of the first quarter. This was despite a renewed rise in foreign sales, suggesting that lower domestic demand was a key reason for slower growth in total new business. However, the rate of expansion in export sales was only marginal.

Softer demand conditions coincided with a slower increase in production across the region. The rate of output growth weakened from February and as only slight.

There were also signs of spare capacity within the ASEAN manufacturing sector, which weighed on hiring. Backlogs of unfinished work continued to fall in March, stretching the current trend to over three-and-a-half years.

Weaker increases in production and new order intakes led businesses to be cautious about hiring and inventory management. Staff numbers were broadly unchanged in March, following two months of expansion. Growth in purchasing activity also slowed from February. Concurrently, inventories of both purchases and finished goods declined further.

Vendor performance deteriorated slightly in March following a brief improvement in February. However, the degree to which lead times lengthened was only slight. In many cases across the region, there were reports of supply shortages in certain raw material such as industrial metals, chemicals, and paper.

ASEAN manufacturers continued to face higher input costs, which led some firms to pass on some of the increase to customers. However, subdued demand conditions limited the extent to which firms could raise their selling prices.

Input cost inflation remained marked in March, with the pace of increase accelerating to the greatest for akmost a year. Inflation remained strongest in the Philippines as new excise taxes worked their way through to higher input prices. Myanmar, Indonesia, Malaysia and Singapore all saw a faster increase in input costs. Vietnam meanwhile reported a softer, albeit still steep, increase in cost burdens.

In response to increased costs, all covered nations registered high selling prices, led by the Philippines.

Finally, business confidence regarding output in the next 12 months remained positive but slipped to the lowest in survey history.

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Source:

IHS Markit 

-R.W.N II

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