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Economy

ASEAN's manufacturing index comes in flat as demand wanes

Japan and South Korea get a dose of good news as activity picks up

HONG KONG   After five months of expansion, Southeast Asia's manufacturing activity turned flat in June, with the Nikkei ASEAN Manufacturing Purchasing Managers' Index standing at the boom-or-bust line of 50.

Indonesia, Myanmar and Malaysia experienced contraction, while the Philippines and Singapore decelerated. Thailand and Vietnam were the two outliers, registering stronger growth compared to a month ago.

Although external orders growth for the region was at a four-year high in June, both production volume and backlogs of work shrank, raising concerns that businesses might pull back from hiring in the near future.

"The greatest worry is that there were signs of a struggle to maintain manufacturing growth among many of the ASEAN nations covered under the survey," said Bernard Aw, economist at IHS Markit. One reason was the sticky inflation in input costs. Producers have not been able to pass that burden onto consumers and are therefore seeing their margins squeezed.

Though Myanmar saw its cost inflation ease, it suffered the greatest gap between input and output prices among the bloc's members.

Outside of ASEAN, India recorded slower growth last month due to less buoyant output and orders. The key source of weakness was the intermediate goods category, according to IHS Markit, noting that new orders in the consumer goods sector continued to climb, while those for capital goods had rebounded.

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