May’s headline PMI rose sharply to 45.6 but is still in the contraction region. The transition from the MCO to the CMCO, and the restart of production have cushioned the downturn. Declines in output and order books were notably less severe than those seen in April.

With the rise in headline PMI, and assuming the Covid-19 pandemic bottoms out, this will be the first major indication that the economy is stabilising. It could mean the possibility for growth to return in 3Q2020.

• The headline Markit Manufacturing Purchasing Managers’ Index (PMI) rose sharply to 45.6 in May, from April's survey-record low of 31.3. Despite a steep rise, it remained below the neutral 50.0 mark. Hence the PMI reading further indicates deterioration in manufacturing sector conditions.

• The transition from the MCO to the CMCO, and the restart of production have cushioned the downturn. Still, the virus impact remains widespread and could continue to affect factory shutdowns and further production cutbacks.

• Notably, the May decline was considerably weaker than at the start of the second quarter. There was a drop in manufacturing output although the rate of contraction has eased substantially since April.

• New orders placed with our producers continued to shrink during May due to the ongoing measures of the MCO imposed domestically and lockdowns abroad to contain the virus.

• While manufacturing activity continued to fall at a steep rate in May, declines in output and order books were notably less severe than those seen in April. With the rise in headline PMI, and assuming the Covid-19 pandemic bottoms out, this will be the first major indication that the economy is stabilising. It could mean the possibility for growth to return in 3Q2020.

Source: AmInvest Research - 2 Jun 2020