• Asean’s Manufacturing PMI rose from 48.6 in October to 50.0 in November.
• In Indonesia, the headline inflation rate rose for third consecutive months to 1.6% yoy in November from 1.4% yoy in October.
• Thailand’s manufacturing production index dropped to 0.5% yoy due to mainly lower production of cars and clothes amid the Covid-19 pandemic

Global manufacturing PMI rose to 53.7 in November, with strong China’s PMI

ASEAN manufacturing PMI expanded in November, as countries in the region are benefiting from the recovery in China’s economy. After hitting a low of 30.7 in April, the manufacturing PMI rose from 48.6 in October to 50.0 in November. This was above the expansion 50 level since February 2020, ending 8-month period of decline since March. However, the recovery in Asean PMI was not across the board, where three out of seven countries registered improvement i.e. Thailand (50.4), Indonesia (50.6) and Singapore (51.7), exceeding the expansion 50 level. Meanwhile, manufacturing PMI in Malaysia slowed to 48.4 in November, Philippines (49.9), Vietnam (49.9) and Myanmar (43.2). China continued to show a sustained recovery in the manufacturing sector, where China’s manufacturing PMI rose for the seventh straight month to 54.9 in November from 53.6 in October. Global manufacturing PMI rose to 53.7 in November, from 53.0 in October. Overall, we believe Asean’s manufacturing to stabilise in 4Q20, but readings in some countries show some concerns of a second/third wave of infections and lockdown measures emerging. As a result, this may likely weigh on the pace of recovery in the region’s economic growth.

Thailand’s manufacturing production index declined by 0.5% yoy in October (-2.1% in September) due to mainly lower production of cars and clothes. This was the eighteenth consecutive months the index has been in negative territory. Thailand’s Ministry of industry forecasted that the index will contract by 8% - 9% this year. Industrial goods account for 80% of total exports. The weak IPI growth was also in tandem with Thailand’s export growth, where it fell for sixth straight months at -6.7% yoy in October. Going forward, we believe the country’s manufacturing sector will show some signs of recovery in 2021, due to low base effect and slightly better global economy.

Separately, in Indonesia, headline inflation rose for third consecutive months to 1.6% yoy in November from 1.4% in October, but still below Bank’s Indonesia’s inflation target of 2-4%. Core inflation rate that exclude volatile food and governmentcontrolled prices, eased to 1.67% yoy (1.74% in October). Headline inflation was lifted mainly by higher cost of food, beverage and tobacco and clothing and footwear. However, cost of transport and information, communication and financial service continued to decline in November. We believe Indonesia’s inflation to remain low in the near term due to subdued economic activity, likely to be hampered by the ongoing partial lockdown in Jakarta, which began since 14 September 2020. As the headline inflation remain below BI’s target range in the near term, we believe BI will likely cut its policy rate further from 3.75%, if needed, to support the economy.

Source: Affin Hwang Research - 4 Dec 2020