The Australian, European and Asian economies are a key day of results and could potentially impact global equities, with PMI data in production posted on Thursday, with the September results showing varying degrees of success in some of Asia’s fastest growing economies.
Indian manufacturing raises gear
Continuing the boom that began in August, the Indian manufacturing sector enjoyed an order and production renaissance, pushing PMI to its highest mark since January 2012.
With updated export sales and stocks expansions, improving business confidence, output has risen for the first time in six months, reflecting an increase in input costs.
IHS Markit (NYSE: INFO) said India’s PMI has increased from an already positive level of 52.0 in August to 56.8 in September, signaling the best reads as well as growth for over 8.5 years.
IHS Markit Graphics and Indian PMI Data
Reports of relaxed resistance and demand recovery have led to Indian manufacturers increasing around 30 points in a few months. This is the third fastest recovery in IHS research history.
Speaking about the data, Pollyanna de Lima, IHS Markit Economics Associate Director, added:
“After six consecutive months of contraction, exports also bounced off, but inputs were purchased at a sharper rate, enhancing business confidence.”
“However, one area that lagged behind was employment. Some companies reported employment disability for workers, while others suggested that the number of staff was kept to a minimum in their efforts to observe social distancing guidelines.”
Vietnam PMI bounces back to the green
A more modest but similar trajectory is Vietnam, whose manufacturing returned to growth in September as Covid eased slightly. This has regained footing of power and new orders, but has increased business confidence and slowed down employment cuts.
This led to the manufacturing industry in Asia’s fifth-growing economy recovering from a negative level of 45.7 points (Sub-50) in August and returning to the green with 52.2 points in September.
IHS Markit Graphics and Vietnam PMI Data
According to the IHS, this latest reading shows the first rise in business conditions over the past three months and the most notable improvement since July 2019.
Anecdotal evidence also suggests that pandemic control is a key factor supporting recovery of operating conditions, as cases were seen during the previous study period.
Recent cases have resulted in increased client demand and “certainly” new orders have increased. In addition to this growth, production expansion was also registered, with new businesses from overseas increasing for the first time since January.
Speaking about the positive effects of virus control, IHS Economics Director Andrew Harker commented.
“After the late July to early August Covid-19 incidents brought the sector back on track in August, the results of the September PMI were more positive.”
“By controlling that pandemic has recovered, businesses have seen an influx of new orders, increased production and were most optimistic for over a year. As before, maintaining these positive trends depends on not being picked up again for virus cases.”
The Philippines is regaining stability
In a more preliminary note, Philippine data showed that manufacturers’ operating conditions have returned to something significantly similar to stability.
At a small pace, new orders rose for the first time since February. Customer demand has been led to improving customer demand as more portions of the country’s economy resumed due to relaxation of COVID restrictions. Similarly, business sentiment has improved to its highest point since February, with bright forecasts attributed to growing demand and hopes that it will be a thing of the past in a not too distant future.
Meanwhile, the output fell to the weakest level in three months, but this was just a small change. However, unemployment continues to grow at a noticeable rate, with manufacturers often associated with non-representatives and adequate capacity of voluntary retirees. Furthermore, the shortage led to higher prices, resulting in higher costs, and respondents simply pass higher costs to their clients due to market pressures to force prices to remain competitive.
After the recession, the Philippine manufacturing PMI rose to 50.1, with 47.3 points in August. This latest reading represents a very modest expansion, with conditions ultimately stable in February.
IHS Markit Graphics and Philippine PMI Data
Speaking about potential improvements to operating conditions, IHS economist Shreeya Patel commented.
“According to the company, the ongoing restrictions related to the Covid-19 pandemic have continued to limit sector performance, forcing some companies to ease operations.”
“The more hopeful memo suggests that stronger business sentiment and efforts to rebuild stocks will prepare panelists for improved demand over the coming months, but optimism is dependent on the development of the pandemic.”
Myanmar was hampered by a surge in COVID cases
Unfortunately, failing to gain traction from Covid was Asia’s sixth fastest growing economy, and its manufacturing industry suffered as performance indicators were suffering from the revival of new cases.
According to IHS Markit, both production volume and new orders “were dropped rapidly” as virus spreads in September were temporarily closed to combat virus spreads in September. In addition to these considerations, worsening business conditions and contraction in labor force, both have stopped the July-August recovery on that track.
As IHS stated, Myanmar-made PMI fell to 53.2 points from its 15-month height in August to 35.9 in September. This represents a noticeable contraction.
IHS Markit Graphics and Myanmar PMI Data
The new figure is the second lowest recorded in the country since the IHS survey began in December 2015, surpassing the April score of 29.0, when the virus peaked. Furthermore, the monthly decline of 17.3 points is actually the largest on record, even more severe than the previous 16.3 records seen between March and April.
According to IHS, four of the five PMI indicators had a negative trajectory in September, with the exception being the time of the supplier. Since the group’s survey began, output and orders have declined at the second fastest rate, with both of these indices recording monthly declines of over 28 points.
Speaking in the dark month of Myanmar’s manufacturing, IHS Economics Director Trevor Balchin said:
“The impact has so far been less severe than the record deterioration in business conditions seen in April. However, the monthly decline in PMI was the biggest decline on record, as it collapsed from 35.9 to over 17 points in 15 months in August.”
“The trajectory over the coming weeks due to the two-week lockdown introduced in Yangon at the end of September is important to ensure that authorities relax new restrictions and allow manufacturing sectors to resume recovery. The October PMI will provide the first indication of rebounding activity, or indeed, further reductions.”
