The manufacturing PMI remained in the contraction region for the fourth straight month in November, reading at 48.4 which is marginally lower than October’s 48.5. Our performance is somewhat in contrast with the Asean trend which rose to the 50 threshold (which separates expansion from contraction) for the first time since March.

The poor manufacturing PMI reading in November did not come as a surprise as it was inflicted by the rising Covid-19 cases both locally and and abroad, and the restrictive measures to contain the virus spread. these lowered the demand for manufactured goods while supply chains faced challenges to deliver inputs in a timely manner. Thus, businesses scaled back on their production.

Nonetheless, looking at the past two months’ manufacturing PMI data, the positive side of it is that it did not present a similar sharp drop as witnessed in April which fell to 35.6 due to the restrictive measures. This could in part be due to the CMCO being more targeted, with less adverse implications on both supply and demand.

Based on the first two months of manufacturing PMI data, it somewhat suggests that 4Q2020 GDP could lose some steam. A very preliminary estimation shows the GDP could fall within the range of 3.0%– 3.8%. This is in part due to subdued demand while businesses are experiencing capacity pressure with backlogs of work reducing that result in a dip in holdings of raw materials and semi-finished goods.

• The manufacturing PMI remained in the contraction region for the fourth straight month. November’s manufacturing PMI came in at 48.4, marginally lower than October’s 48.5. Our performance is somewhat in contrast with the Asean trend which rose to the 50 threshold (which separates expansion from contraction) for the first time since March.

• The poor manufacturing PMI reading in November did not come as a surprise. With the rise in the number of Covid-19 cases both locally and and abroad, added with the restrictive measures to contain the virus spread, these weighed on both the supply and demand. In the case of demand, there is a drop for manufactured goods. Supply chains were seen facing challenges to deliver inputs in a timely manner. Thus, businesses scaled back on their production.

• Looking at the past two months’ manufacturing PMI data, the good side of it is that it did not present a similar sharp drop as witnessed in April which fell to 35.6 due to the restrictive measures. Benchmarking against the first wave of the virus spread and the restrictive measures imposed, this time around the drop is far more moderate. This could in part be due to the CMCO being more targeted, with less adverse implications on bot supply and demand.

• Based on the first two months of manufacturing PMI data, it somewhat suggests that 4Q2020 GDP could lose some steam. A very preliminary estimation shows the GDP could fall within the range of 3.0%–3.8%. This is in part due to subdued demand while businesses are experiencing capacity pressure with backlogs of work reducing that result in a dip in holdings of raw materials and semi-finished goods.

Source: AmInvest Research - 2 Dec 2020