The ASEAN manufacturing sector took another knock in October, according to official data released Friday, with a subdued economic recovery in China and the lagging effects of monetary policy in the region taking its toll. 

“Following the first deterioration in operating conditions for just over two years in September, the start of the final quarter signaled a further decline in the health of the ASEAN manufacturing sector,” said S&P Global in a release on Friday. 

The headline S&P Global ASEAN Manufacturing Purchasing Managers’ Index was unchanged from September at 49.6 in October. Anything below 50.0 signals that the sector contracted during that month, while anything above indicates expansion. 

“The latest data revealed that production levels expanded at the weakest rate in 25 months,” Maryam Baluch, Economist at S&P Global Market Intelligence said. 

“However, the latest upturn in output would have been largely supported by the build-up of orders seen for most of 2023, as new orders dropped for the second month in a row. If demand continues to soften, we could see manufacturers reducing their output in the coming months.” 

With demand softening and reduced output on the cards, Economics Associate Director at S&P Global Market Intelligence Jingyi Pan told Diplomatic Network (Asia) that this could mean fewer price increases at the checkout counter for consumers. 

“Based on PMI trends, the average consumer may see slower price increases or even reductions in some cases as manufacturers, and thereby retailers, attempt to retain customers and drive sales. As far as October PMI data showed, however, underlying demand from consumers has remained subdued,” Pan said in an exclusive interview on Friday.  

Of the seven ASEAN nations covered by the survey, five recorded a deterioration in the health of their manufacturing sector, S&P Global noted.  

Closer look at ASEAN manufacturing sector

Malaysian goods producers continued to weigh down the region the most, with a PMI of 46.8 in October. This was unchanged from September.  

Thailand’s manufacturing sector recorded a PMI of 47.5 in October, worsened from 47.8 in September. The rate of decline in the Thai manufacturing sector was the most pronounced in over two-and-a-half years. 

Singaporean good producers’ headline figure was 48.6, improved from September’s 47.3 but still in contraction territory.  

Myanmar swung into contraction territory with a headline PMI of 49.0 from 50.1 in September.  

Vietnam registered a marginal downturn in October at 49.6, slightly worsened from 49.7 a month before.  

Two countries’ manufacturing sectors kept their heads above water. Indonesia posted a manufacturing PMI of 51.5 in October. Although in expansion territory, the headline figure worsened from 52.3 in September.  

Filipino manufacturers reported a headline figure of 52.4, improved from 50.6 a month prior.  

“While the former saw growth momentum ease to a five-month low, operating conditions improved at the fastest pace in seven months at Filipino manufacturing firms,” S&P Global said.  

Looking ahead 

Manufacturing sectors across the ASEAN region, as well as the broader economy, will likely experience some counter-current going ahead.  

“Global economic headwinds continue to cloud the outlook,” Maryam said, “including the subdued economic recovery in China and the lagging effects of monetary policy tightening across the majority of the ASEAN constituents and elsewhere. 

“On the flipside, with inflationary pressures easing, this could help to support sales and revive demand.” 

With output in the region looking to decline, Pan told DNA consumers will hold the key to keeping manufacturers’ production running at decent speeds.  

“Price pressures have broadly eased in the ASEAN region, outlining the dissipation of this negative factor that had previously played a significant role in weighing on demand,” S&P Global Market Intelligence’s Pan said.  

“Price pressures have broadly eased in the ASEAN region, outlining the dissipation of this negative factor that had previously played a significant role in weighing on demand. That said, the easing of inflationary pressures was partly driven by the cooling of demand, affected by high interest rates and the softening of global economic conditions, including in mainland China,” Pan said.  

“To see any substantial improvements in output, a revival in demand growth will still be key.” 

The S&P Global ASEAN manufacturing PMI is compiled by S&P Global from responses to monthly questionnaires sent to purchasing managers in panels of manufacturers in Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, totalling around 2,100 manufacturers. These countries account for 98% of ASEAN manufacturing value added, according to World Bank world development indicator.    

Data for the PMI were collected between October 12 and 25.