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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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