The purchasing manager’s index (PMI) data by S&P Global Ratings revealed a renewed, but slight, improvement in the manufacturing sector in the ASEAN region at the start of the year.

The PMI rose from 49.7 in December to 50.3 in January, crossing the neutral 50 threshold for the first time in five months - the threshold to confirm the manufacturing industry expands if the index is higher than 50 and narrows if it falls below 50.

Output rose at the quickest pace since last August. The upturn was supported by firms working through backlogs, which fell for the seventh successive month, as new orders declined again.

The latest decline in sales was the weakest recorded in the current five-month sequence of decline, S&P Global Ratings noted in a release. In terms of prices, inflationary pressures intensified, with both input prices and output charges rising at the strongest rates in ten months.

Demand weakness was particularly notable across export markets, and this led overall new orders to decline for the fifth straight month. The rate of contraction was the softest seen over this period and only marginal.

Maryam Baluch, an economist at S&P Global Market Intelligence said, "In the future, manufacturers will not be able to maintain output growth amid demand shortages. The PMI could fall below 50 if new orders continue to decline, signalling many obstacles in the global economy and stagnant demand from foreign markets."

At the national level, growth was recorded across four of the seven ASEAN constituents, with Indonesia leading the upturn by a notable margin. Meanwhile, the most marked deterioration in conditions was seen in Myanmar.

Trade-dependent economies such as Thailand and Malaysia will continue to see production indexes decline, while consumption-based economies such as Indonesia and the Philippines will continue to grow.

Although Malaysia's January PMI increased to the highest level in the past 16 months, it is still in the decline zone. Thailand is also in a similar situation when the number of new orders and backlog of work decreased sharply.

In Vietnam, companies were concerned about business conditions but also hoped that demand and customer numbers would improve. Vietnam's PMI recorded growth again in early 2024 with the threshold above 50 thanks to the increasing new orders and output.

Looking ahead, ASEAN manufacturers continue to express strong optimism when assessing the 12-month outlook for output. The overall level of positive sentiment remained below the historical average, however, despite rising from December.