Indonesia, Vietnam August factory activity rises, Malaysia falls again: PMI

August 31, 2016 8:36 PM EDT

A worker holds a roller of yarn at PT Trisula International in Bandung, West Java province September 17, 2013. REUTERS/Beawiharta

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(Reuters) - Factory activity increased in Indonesia and Vietnam in August, while that in Malaysia contracted more than in the previous month, according to IHS Markit purchasing managers' indexes released on Thursday.

In Indonesia, Southeast Asia's largest economy, the PMI index moved above the 50.0 level that demarcates expansion and contraction.

Vietnam had a ninth straight month of expansion, and by a slightly faster pace, and Malaysia suffered its 15th consecutive month of contraction, the indexes shows


Data from the IHS Markit's Nikkei Indonesia Purchasing Managers' Index for August. Readings above 50.0 signal expansion in manufacturing activity, rather than contraction.



50.4 48.4 51.9


- The seasonally-adjusted index for August edged back above 50.0 as new orders, exports and output all expanded.

- For new export orders, August's expansion ended a 22-month sequence of contraction.

- Order book volumes, which fell in July, rose in August, partly because the offering of cheaper prices increased domestic and international demand.

- Stocks of raw materials and semi-finished goods increased in August. Pre-production inventories rose at a moderate pace that was the quickest in more than two years.

- But manufacturing employment declined for a second straight month, and at a fastest pace this year.

Commenting on the Indonesia survey, Pollyanna De Lima, economist at IHS Markit, said:

"The return to growth of Indonesia's manufacturing sector in August is a positive sign, especially as July's decline raised concerns regarding the start of a new downturn. Survey data indicate that firms are undoubtedly cautious about the short-term outlook for new work and production, as highlighted by another reduction in payroll numbers."

"August's increases in output and new orders lay a platform that companies will hope to build on in coming months should improvements in client demand strengthen. IHS Markit expects GDP growth in Indonesia to accelerate from the post-recession low of 4.8 percent in 2015 to 5.1 percent in 2016, with lower interest rates anticipated to support private consumption."


Data from the Markit Malaysia Purchasing Managers' Index for August.

Readings above 50.0 signal an improvement in business conditions while readings below indicate deterioration.



47.4 48.1 47.1


- Manufacturing activity in August contracted at a quicker rate than in July, following sharper declines in output, new orders and employment

- Production fell on a drop in total new orders, partly from slowing international demand.

- Employment fell to its weakest since April 2013 as operating conditions worsened.

- Input buying contracted for a 15th straight month, but registered its strongest levels during that period.

Commenting on the Malaysia PMI survey, Amy Brownbill, economist at Markit, said:

"Latest survey data for the Malaysia manufacturing sector signaled a sharper deterioration in operating conditions. This was underpinned by quicker declines in output, new orders and employment with the rate of job shedding the fastest in over three years.

"Meanwhile, cost inflationary pressures intensified, with input prices increasing at the joint-second fastest rate in the series history. This was linked by the survey panel to higher raw material costs stemming from unfavorable rates and the rise in the sales tax."


Data from the Nikkei Vietnam Purchasing Managers' Index for August.

Readings above 50.0 signal an increase in business activity while readings below indicate deterioration.




52.2 51.9 52.6 52.7 52.3 50.7 50.3


- Output and new orders increased at weaker rates

- Employment posted the strongest rise in 32 months

- Purchasing activity has biggest jump since May 2015

Vietnam's August PMI edged up to 52.2 from 51.9 in the previous month, showing a modest improvement in operating conditions, thanks mainly to faster rises in employment and purchasing activity.

Employment had the strongest jump since December 2013 as a fifth consecutive rise, with staffing levels increasing in the investment and consumer goods sectors.

Manufacturers raised their purchasing activity due to higher new orders this month, supporting an increase in stocks of purchases that was biggest in 15 months.

Output and new orders both expanded, but at a slower pace compared with recent months, while input costs extended their climb but firms reduced their charges, apparently in a bid to improve sales.

Markit is a registered trade mark of IHS Markit Limited.

(Reporting by Nilufar Rizki in JAKARTA, Emily Chow in KUALA LUMPUR and My Pham in HANOI; Editing by Richard Borsuk)

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