MMRD BULLETIN
December 8, 2019

Nikkei Myanmar Manufacturing PMI™

Manufacturing new order growth strengthens in November

Key points:

▪ Marked increase in new business supports strong rise in output ▪ Weaker rate of job creation weighs on headline PMI ▪ Slowest rise in input prices in four-year survey history

The latest PMI™ survey data from IHS Markit's survey of private sector manufacturers in Myanmar revealed a further solid improvement in operating conditions in November, fuelled by a strong rise in new orders. Output rose at a robust pace and expectations for production improved, albeit remaining weaker than at the mid-point of 2019. Meanwhile, cost pressures eased as average purchase prices rose at the slowest rate since the start of the survey four years' ago.

The headline IHS Markit Myanmar Manufacturing PMI is a composite single-figure indicator of manufacturing performance. It is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. Any figure greater than 50.0 indicates overall improvement of the sector.

Four of the five components of the headline PMI had positive contributions in November, the exception being stocks of purchases (which has the smallest weight at 10%). The downward tick in the PMI mainly reflected a slower rate of employment growth, alongside a softer rise in output. Driving the overall growth of the sector was a marked rise in new business in November. New orders rose for a series-record thirteenth successive month, and at the fastest rate since June.

In line with the trend for new orders, production rose for a survey-record thirteenth consecutive month in November. The rate of growth was little-changed from October's strong pace as firms not only accommodated new orders but continued to deplete their backlogs. The volume of outstanding business in the manufacturing sector fell for the forty-second month running, and at the fastest rate since July 2018.

Manufacturers supported workloads by expanding their workforces for the twelfth month in a row in November, also a survey-record sequence. The rate of job creation eased since October, however. Purchasing operations also continued to expand in November, and at the fastest pace in three months. Despite this, stocks of inputs fell further, reflecting the current strong pace of output growth. Supply chains were broadly able to cope with demand, with suppliers' delivery times lengthening only fractionally since October.

The rate of input price inflation slowed for the fourth month running in November from July's marked pace. Moreover, the increase registered in the latest period was the weakest since the survey began in December 2015. Weak cost pressures fed through to output prices, which rose at the slowest rate since April. That said, for the first time in the survey history charges rose more sharply than input prices, suggesting improving profit margins in the manufacturing sector.

The 12-month outlook for manufacturing output in Myanmar remained positive in November. Sentiment strengthened to a three-month high, but remained softer than the long-run survey average.

Comment:

Commenting on the latest survey results, Lewis Cooper, Economist at IHS Markit, said:

"Manufacturing in Myanmar looks set to end the year with solid underlying growth, with the overall rate of expansion in November keeping pace with the strong 2019 trend. The PMI posted 52.7 in the latest period and is averaging 52.8 in 2019, easily the highest achieved during the four-year history of the survey.

"New order data signalled a broad base of rising demand, with work linked to the construction industry noted as a key source of domestic orders.

"Firms also benefited from easing cost pressures, with the rate of input price inflation slowing to a survey-record low in November. Moreover, factory gate prices increased more sharply than purchasing costs for the first time, implying strengthening profits."

Sources: Nikkei, IHS Markit
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