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June 18, 2019

Nikkei Myanmar Manufacturing PMI™

PMI rises to highest since April 2018

Key points:

▪ Operating conditions improve at solid rate
▪ Faster growth in output and new orders
▪ Employment expansion quickest in series history

Goods producers across Myanmar registered a solid improvement in the health of the manufacturing sector in May. Overall growth was supported by quicker expansions in output and new orders, following stronger client demand. Consequently, firms recorded the fastest rise in workforce numbers since the series began in December 2015. On the price front, inflationary pressures picked up as rates of increase in both input prices and output charges quickened to six month highs. Meanwhile, planned investment in machinery and new product development drove a stronger degree of confidence in output growth over the coming year.

Production continued to increase across Myanmar’s manufacturing sector in May. The upturn was sharp overall and accelerated to a 13-month high. Anecdotal evidence suggested the latest expansion was linked to greater client demand and increased new order volumes.

Subsequently, firms indicated a stronger rise in employment during May. The rate of growth in workforce numbers was moderate but also the fastest in the series history (since December 2015). Manufacturers commonly attributed the increase in staffing levels to greater new order volumes. Meanwhile, backlogs contracted at the slowest rate since September 2018.

At the same time, input costs increased further in May, with the rate of inflation picking up to a sixmonth high. Higher purchase prices were linked to greater raw material costs following stronger demand for inputs and supplier shortages. The rate of output charge inflation also reached a six-month high as firms passed higher costs on to clients.

Input buying among manufacturing firms increased for the fifth consecutive month in May, following greater production requirements. Meanwhile, post production inventories were depleted further as stocks were utilised in production.

Output expectations among goods producers improved in May, with firms expressing the greatest degree of confidence in production growth over the coming 12 months since September 2018. Optimism was reportedly driven by planned investment in machinery and new product development.

Comment:

Commenting on the Myanmar Manufacturing PMI survey data, Siân Jones, Economist at IHS Markit, which compiles the survey, said:

“The health of the Myanmar manufacturing sector strengthened further in May, with the latest PMI reading reaching a 13-month high. Output and new order growth accelerated as firms stepped up their hiring, increasing workforce numbers at the fastest pace in the series’ history.

“However, reports of frequent electricity outages and greater demand for inputs led to supplier shortages and further delays to delivery times. Firms also registered a faster rise in cost burdens which was partly passed on to clients through higher factory-gate prices.

“Meanwhile, the sharper rise in new business was reflected in more positive expectations towards the year ahead. Manufacturers signalled the highest degree of optimism towards a rise in production since last September.”

Sources: Nikkei, IHS Markit

 

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