Philippines’ manufacturing PMI higher, but others trended lower in May

While the overall ASEAN manufacturing PMI has not been released for the month of May, judging from some of the individual countries' PMI performance during the month, we believe growth in the regional manufacturing sector has started to show some signs of softening in 2Q17, after registering strong growth in 1Q17. For instance, Malaysia’s manufacturing Purchasing Managers’ Index (PMI) unexpectedly fell in May to 48.7. Excluding the one month above the expansionary level at 50.7 in April, PMI has remained in contraction territory (below 50) over twenty-four months since April 2015.

Similarly, Vietnam’s manufacturing PMI also slowed sharply from 54.1 in April to 51.6 in May, where both production and new orders declined during the month, attributed to rising inventories, as external demand slows. Thailand’s manufacturing PMI declined below the 50-threshold mark for the second consecutive month, from 49.8 in April to 49.7 in May, reflecting deterioration in business conditions for the manufacturing sector. The country’s manufacturers were cautious about their inventory levels, where drawdown of inventories for inputs and finished products, will likely lead to lower manufacturing production and economic growth. However, in contrast, Philippines’ manufacturing PMI rose from 53.3 in April to 54.3 in May, the highest level this year, supported by robust growth in output and new orders.

The subdued index in Asean manufacturing PMI reflected similar trend in other major economies, including China and US. The Caixin China General Manufacturing PMI declined by 0.7 points to 49.6 in May (50.3 in April), falling below the 50-threshold mark for the first time in eleven months, pointing to some slowdown in the global manufacturing activities in 2Q17. IHS Markit US manufacturing PMI eased from 52.8 in April to 52.7 in May, but the Eurozone manufacturing PMI rose 56.7 to 57 during the same period. As China remains the major trading partner in most Asean countries, the slowdown in China’s economic growth momentum recently has a more significant drag on the region economies. With the slowdown in China’s PMI, the global manufacturing PMI also moderated slightly from 52.7 in April to 52.6 in May, the lowest level since October 2015, but still above the long-run series average of 51.4. This indicates that the rate of expansion in the global manufacturing sector has only moderated in 2Q17, but not signaling a sharp economic slowdown in manufacturing sector and global economy.

This week, Singapore’s manufacturing production slowed from 11% yoy in March to 6.7% in April, but slightly better than market expectations of 6%. Stronger growth in electronics sector (48% yoy in April vs 38.6% in March) was offset by a sharp contraction in production of biomedical manufacturing, which declined by 23.3% yoy in April.

Source: Affin Hwang Research - 2 Jun 2017