FACTORY activity in the ASEAN region deteriorated further to a record low in April due to disruption on the supply side while demand dried up during the pandemic, IHS Markit said.
In a statement Tuesday, IHS Markit said the ASEAN Purchasing Managers’ Index (PMI) fell to “an all-time low” of 30.7 in April, further worsening from a 43.4 reading in March, which represents “by far the largest monthly deterioration in manufacturing conditions since the series began in July 2012.”
“As was the case in March, the headline figure partly reflected a record lengthening of suppliers’ delivery times, the index for which is inverted in the PMI calculation, as longer times are usually associated with improving demand. This was outweighed, however, by unprecedented contractions in output, new orders, employment and pre-production inventories,” it said.
PMIs are reported on a hundred-point scale, with readings above 50 signifying an expansion in purchasing activity. A reading below 50 indicates a decline in such activity.
Purchasing activity, especially in the manufacturing sector, is a leading indicator of overall economic activity, because factories must pre-order their raw materials before they can be processed and sold. Their purchase orders signal how much they estimate they can produce and sell in the short term.
All seven countries surveyed posted declines last month, with the Philippines third with a record-low PMI reading of 31.6, behind Vietnam’s 32.7 and Thailand’s 36.8.
The Philippines had a PMI reading of 39.7 in March.
Indonesia was the weakest of the countries surveyed at 27.5, plunging from 45.3 in March. Myanmar was at 29 in April from 45.3 in March, while Malaysia settled at 31.3 from 48.4 in March.
Meanwhile, Singapore recovered in April to 29.3 from the record low of 18.1 in March.
Purchasing managers surveyed rated their firms’ prospects in five categories with the following weightings: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%).
“Central to the substantial deterioration were record rates of decline across all five components of the headline figure, with output, new orders, employment and pre-production inventories dropping markedly across the region to drag the PMI down further as the impact of the COVID-19 outbreak intensified,” Lewis Cooper, economist at IHS Markit, was quoted as saying.
IHS Markit said the survey showed “marked reductions” in output, new orders and exports as domestic
and international demand plunged largely due to lockdowns and other emergency measures imposed by governments.
It said companies across the region continued to reduce headcount last month, “with the rate of job shedding the fastest on record.”
Buying activity, meanwhile, was “scaled back substantially,” declining at its fastest pace in the history of the indicator.
It said due to continued disruptions in the supply chain, supplier delivery times lengthened by the “greatest extent” in the history of the survey.
“Overall, April data highlight the substantial impact of the coronavirus pandemic on ASEAN manufacturers. With measures to restrict the spread of the virus likely to continue for some time, and demand both at home and abroad essentially frozen, firms need to prepare for a tough second quarter,” Mr. Cooper said. — Beatrice M. Laforga