PMIs Improve But Orders & Price Pressures Concerning

Asian manufacturing started the year more positively driven by accelerating production. There were broad based increases in the January S&P Global manufacturing PMIs with Korea returning to growth. While the ASEAN PMI rose above the breakeven 50-level for the first time since August, orders continued to fall, which is negative for the outlook. The other area of concern was price pressures at their highest rate in ten months with both costs and selling prices accelerating, but there was no mention of rising shipping costs yet.

• Indonesia continues to be the ASEAN outperformer with the PMI rising to 52.9 from 52.2 with both production and domestic and export orders growth rising, although foreign demand remains lacklustre. There was no change in employment but business expects economic conditions to advance. Unlike the rest of ASEAN, inflation eased (January CPI data due later today), costs continued to rise but at a 3-month low and selling price inflation fell further below its historical average.
• Thailand saw a slight improvement in the PMI to 46.7 from 45.1 driven by better output as producers work through backlogs, but the index continues to signal that production is contracting as new orders continue to fall significantly. Foreign orders were not as soft as the aggregate. Weak new business is resulting in a drop in headcount. December production fell 6.3% y/y. Business confidence is improving on hopes of better demand. Raw material costs boosted input inflation and producers passed this onto customers with both measures of price pressures rising above their historical averages.
• The PMI for the Philippines remains above 50 but showed easing activity growth as it fell to 50.9 from 51.5 due to softer orders and production. But price pressures remained “historically muted, and even softened” in January.

Source: MNI - Market News/Bloomberg