MMRD BULLETIN
July 16, 2019

Nikkei Myanmar Manufacturing PMI™

Robust new business growth continues in June

Key points:

▪ Output and new orders increase steeply ▪ Output expectations reach strongest since January 2017 Input price inflation remains marked

June survey data signalled a solid improvement in operating conditions across Myanmar's manufacturing sector. Overall growth was driven by sharp increases in output and new orders. Subsequently, business confidence strengthened and was the highest since the start of 2017. Employment continued to increase in response to rising workloads. Meanwhile, input costs rose at a steep rate that was the second-fastest in 2019 so far (behind May's recent peak).

A key contributing factor behind June's headline PMI was a strong rise in production. Despite the rate of growth softening slightly, it remained among the fastest in the series history. A number of survey respondents linked the upturn to greater domestic and foreign client demand.

Growth in new business received by manufacturers remained sharp in June, with panellists stating that demand from returning customers and the acquisition of new clients had driven the expansion. The latest upturn extended the current sequence of growth that began in November 2018.

Subsequently, goods producers registered stronger output expectations towards the year ahead. The improvement in business confidence was often linked to new product development and planned investment in new technology. Furthermore, the level of optimism was at its highest since January 2017.

On the price front, input cost inflation remained elevated in June, as higher supplier prices and raw material shortages drove up cost burdens. The rate of increase dipped only slightly from May's recent peak. Nonetheless, greater client demand allowed firms to partly pass on higher input prices to customers. The pace of charge inflation accelerated to the fastest since November 2018.

Meanwhile, employment continued to increase, stemming from a sharp rise in new business. The upturn was marginal but quicker than the series trend. Pressure on capacity was exacerbated by electricity shortages which led to the slowest decline in backlogs of work for three years.

Electricity outages were also linked to longer supplier delivery times. Panellists stated that the fractional deterioration in vendor performance was due to difficulties processing orders. Nonetheless, lead times lengthened to the smallest extent since last November.

Goods producers increased their input buying in June. The rate of expansion in purchasing was moderate and mainly reflected greater production requirements. Inventories were depleted among manufacturers in June. Post-production stock levels fell markedly as firms sought to ship goods immediately. Meanwhile, stocks of purchases decreasing following three consecutive months of expansion.

Comment:

Commenting on the latest survey results, Siân Jones, Economist at IHS Markit, said:

"Myanmar's manufacturers registered another solid improvement in business conditions in June. Upturns in production and new business remained sharp following further buoyancy in client demand at home and abroad." "Following several months of muted business confidence, optimism picked up and was the strongest since January 2017. Panellists expressed greater expectations towards investment in new technology and product development." "Meanwhile, input cost inflation remained elevated as higher supplier prices put pressure on profit margins. Nevertheless, the rate of charge inflation quickened for the fourth successive month amid greater client demand." "At the same time, backlogs of work fell at the slowest pace for three years as production was held back by ongoing electricity outages." Sources: Nikkei, IHS Markit  
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