Industrial Output: Malaysia and Vietnam reported stronger upturns during December
ASEAN manufacturing conditions continued to improve sharply during December, according to the latest IHS Markit Purchasing Managers’ Index (PMITM) data. Output and new orders expanded again, with the pace of growth in the former nearing October’s peak. Ongoing supply constraints contributed to more intense inflationary pressures, however, as the rates of both cost and output price inflation accelerated on the month and remained among the strongest on record.
The headline PMI remained well above the neutral 50.0 level in December, signalling a third successive monthly improvement in the health of the ASEAN manufacturing sector. Moreover, rising from 52.3 in November to 52.7 in December, the latest reading was indicative of an accelerated pace of improvement that was the second-fastest on record.
Lewis Cooper, Economist at IHS Markit, says, “The ASEAN manufacturing sector rounded off 2021 with another solid performance. Business conditions continued to rebound, with the PMI ticking up on the month to produce an average reading for the fourth quarter that was the highest on record.
“Growth in December was again driven by sustained rises in output and new work, the rate of growth in the former accelerating notably to a near-record pace. At the same time, inflationary pressures intensified slightly, as cost burdens were again pushed up by ongoing supply problems, with the rates of cost and average charge inflation amongst the steepest on record.
“Nonetheless, firms’ expectations for output over the coming year improved on the month, with sentiment
the strongest since May 2019. Indeed, the ASEAN manufacturing sector remains in a strong position as we enter 2022, with the latest rebound showing little signs of slowing.”
Five of the seven constituent ASEAN nations reported an improvement in manufacturing conditions during the closing month of 2021. Growth was led by Singapore, where the headline PMI hit an all-time high of 58.0 (joint with April 2013) and signalled a rapid overall upturn. Meanwhile, Indonesia recorded a fourth straight monthly improvement in conditions. The PMI (53.5) dipped further from October’s peak but nonetheless pointed to a sharp rate of expansion.
Elsewhere, both Malaysia and Vietnam reported stronger upturns during December. In the former, the PMI ticked up to an eight-month high of 52.8 and signalled a strong improvement in the health of the sector. Vietnam’s headline reading (52.5) was also the highest since last May.
The Philippines was the only other constituent nation to record an improvement in manufacturing conditions during December. At 51.8, the PMI pointed to a rate of growth little changed from November and moderate overall.
At the same time, Thailand saw a fresh deterioration in manufacturing conditions. The headline index dipped below the 50.0 mark for the first time since September, though at 49.5, was indicative of only a slight contraction overall. Finally, Myanmar remained in contraction territory for the sixteenth month running in December. That said, the PMI (49.0) ticked up to the highest in this sequence and signalled only a marginal rate of deterioration.
Overall, the ASEAN manufacturing sector recorded a solid performance in December. The latest upturn was driven by a near-record rate of output growth, in addition to a further solid expansion in order book volumes, albeit one that was slightly weaker than in November.
December data also pointed to accelerated purchasing activity at ASEAN goods producers. In fact, the rate of increase was the quickest on record. Subsequently, pre-production inventories ticked up further.
Supply constraints continued to hinder stock building efforts somewhat, as average lead times for inputs lengthened sharply and for the twenty-third month running.
Concurrently, firms recorded more severe inflationary pressures in December. Cost burdens rose again, with the rate of inflation accelerating to the joint-third-highest on record. In response, firms again raised their selling prices. The latest rise in charges was the fastest since October 2013 and rapid.
Meanwhile, backlogs of work rose further, with capacity pressures amongst the strongest on record. Nonetheless, employment decreased again, although the rate of reduction eased to a fractional pace.
Finally, business confidence improved since November, with sentiment the strongest since May 2019.