THE PHILIPPINES lost out to Vietnam in January in terms of improvement of manufacturers’ business in seven members of the Association of Southeast Asian Nations (ASEAN), tying with Myanmar for second place after both saw a “modest increase” in pace from December, according to IHS Markit’s monthly region-wide tracking for Nikkei, Inc. that was released on Friday.
The Nikkei ASEAN Manufacturing Purchasing Managers’ Index (PMI) picked up to 50.2 in January from 49.9 in December, with Vietnam displacing the Philippines “to lead growth rankings across the region at the start of 2018 as growth in its manufacturing sector picked up to a nine-month high”, the report read.
Vietnam logged a “solid” 53.4 reading, while the Philippines and Myanmar each posted a “modest” 51.7.
The seasonally adjusted Nikkei Philippines Manufacturing Purchasing Managers’ Index that was released on Thursday fell to 51.7 last month from 54.2 in December and 52.7 in January 2017, “signalling only a modest improvement in the health of the sector,” in contrast with “solid expansion in recent months.”
“The latest reading was the third-lowest in the survey history” that began in January 2016 for the Philippines and the lowest since September 2017’s 50.8, the report read.
Besides Vietnam, Myanmar and the Philippines, Thailand (50.6) and Malaysia (50.5) beat ASEAN’s 50.2 reading in January.
A PMI reading above 50 suggests improvement in business conditions compared to the previous month, while a score below that signals deterioration.
January saw Indonesia (49.9) and Singapore (46.4) falling below the 50 mark that denotes no improvement from the preceding month.
The manufacturing PMI is composed of five sub-indices, with new orders having the biggest weight of 30%, followed by output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%).
The Philippines and Vietnam have been close competitors for the region’s top spot, with 2017 seeing the Philippines on top seven times in January, May, June, July, October, November and December, and Vietnam at the helm in the other months.
“The ASEAN manufacturing economy started 2018 on a positive footing, but growth remained fragile,” the report quoted IHL Markit Principal Economist Bernard Aw as saying, noting that “[b]oth output and total new orders grew marginally, but export sales contracted for a second month running”.
While “[f]actories remained cautious about purchasing activity, which contributed to a further drop in inventories”, “spare capacity” could make job growth slow and “strong cost pressures” due to shortage of key production inputs squeezed firms’ profit margins, “[e]ncouragingly, business confidence about output in the year ahead remained strong, with optimism holding steady at a near one-year high”.