SINGAPORE -- Manufacturers in Asia's emerging economies experienced better operating conditions in March, thanks to easing inflation, but they still face slowing international demand due to trade uncertainties and a semiconductor slump, the latest Nikkei Purchasing Managers’ Index survey found.
The monthly Nikkei PMI survey asks companies in major Asian countries and regions except China about changes in output, orders and other business conditions compared with a month earlier. A PMI reading below 50 indicates contraction, while one over 50 points to expansion.
Asian manufacturers faced difficulties in the past few months due to falling overseas demand stemming from uncertainties over U.S.-China trade relations, with most countries and regions showing a drop in their manufacturing PMI in February. An expected slowdown in China and a global semiconductor slump have also darkened the prospects.
But business conditions seemed to improve in March, with eight of the 15 sets of PMI marking a rise from February while seven showed a drop. India topped the list at 52.6, while Malaysia stood at the bottom at 47.2.
One favorable trend seen in March was easing inflation. In the seven economies in the Association of Southeast Asian Nations, the Input Costs index marked the lowest in its seven years of survey history at 50.7. Respondents found that softer rises in raw material prices helped them to manage costs, the survey report noted.
The headline ASEAN manufacturing PMI for March rose to 50.3 in March from 49.6 in February, making it the first expansion above 50 in three months.
“The rate of input price inflation dropped to a record low, as material prices remained subdued compared with last year,” said David Owen, economist at IHS Markit. “Naturally, this should help companies manage their balance sheets in this particularly difficult period.”
Weakness in regional currencies exacerbated rising input costs last year, while many manufacturers faced difficulties in passing on increased costs to their buyers. A rise in oil prices also hit manufacturers last year.
In Indonesia, the input prices index fell below 50 for the first time in its eight years of survey history to 49.6 in March. A stronger exchange rate and weaker oil and commodities prices kept input prices manageable, benefitting the country’s main manufacturing sectors such as food and machinery. Indonesia’s headline PMI rose to 51.2 in March from 50.1 in February.
Malaysia's consumer price index also fell for a second straight month in February from a year ago. The Philippines headline CPI growth rate, too, declined for the sixth consecutive month from its peak in September.
The U.S. and China extended their three-month trade tariff truce beyond March 1, and the outlook appeared to be more favorable for Asian nations as that was seen as a sign of the two countries nearing a resolution.
Yet, it is too early to be optimistic, analysts said, as some key manufacturing economies still faced a contraction in their March PMI. Taiwan’s figure was 49.0 in March, making it the sixth month in a row to record a contraction, while South Korea marked 48.8, the fifth consecutive month to mark a fall.
The New Export Orders index -- an indicator for international demand -- stood below 50 in many economies, with ASEAN marking 49.1, Taiwan 47.1, South Korea 46.8 and Japan 48.1, showing a continued slump in semiconductor demand and overall China slowdown. Samsung Electronics last Friday reported that its operating profit fell more than 60% on the year in the January-March quarter, hit by sinking prices of display panels and memory chips.
“PMIs rose across much of emerging Asia last month. But it’s too soon to call a turning point,” said Alex Holmes, Asia economist at Capital Economics.
