By Kimberley Kao
Sentiment among Southeast Asian manufacturers fell to its lowest level since the pandemic, with confidence slipping to a five-year low amid trade policy uncertainty and subdued demand.
This came as the region's manufacturing sector saw its first rise in output since March. The Asean PMI gauge returned to expansion in July at 50.1, slightly above the neutral mark of 50.0, compared with 48.6 in June.
"Despite these emerging positive trends, the latest data also indicated a further erosion of confidence," said Maryam Baluch, economist at S&P Global Market Intelligence. "While an increase in output is anticipated, the growth rate is expected to remain subdued."
A series of U.S. tariff policy changes have clouded the outlook for Asian manufacturers, leaving businesses hesitant to invest as they assess future risks.
July's S&P manufacturing PMI Future Output Index--which measures expectations regarding output in the year ahead-- showed subdued confidence among goods producers in Asia, with optimism at one of its lowest levels since the Covid-19 pandemic, said Jingyi Pan, economics associate director at S&P Global Market Intelligence.
While front-loading activity is easing, positive domestic demand has supported output growth in some economies, Pan said.
Still, persistent trade uncertainty is keeping companies from making longer-term plans, and the PMI data so far have yet to reflect significant shifts in regional supply chains, Pan added.
Manufacturers in Taiwan and South Korea were in particular pessimistic about future production, signaling likely continued near-term weakness for these economies.
Both saw sharp declines in new orders in July, continuing the downward momentum since the Trump administration announced tariffs on dozens of countries in April.
Taiwan's July PMI indicated that firms remained downbeat, with output, new orders and export sales all falling at the fastest rates since August 2023, said Annabel Fiddes, economics associate director at S&P Global Market Intelligence.
The July PMIs offered a mixed picture of Asia's factory sector.
Vietnam's PMI showed a rise in new orders for first time in four months, though export weakness persisted due to tariffs. Cost inflation also quickened to a seven-month high.
Producers are facing challenges in sourcing raw materials due to supply delivery delays and building cost pressures, which could cause issues in the coming months and limit growth, said Andrew Harker, economics director at S&P Global Market Intelligence.
India remained a bright spot, with expanding new orders and strong domestic demand, but jobs growth has slowed among manufacturers, Pan said.
Asia's export-oriented manufacturing sectors are likely to continue facing pressure in the coming months, said Shivaan Tandon, markets economist at Capital Economics.
"It's possible that the PMI figures are reflecting manufacturers' pessimism about the outlook," he said.
Write to Kimberley Kao at kimberley.kao@wsj.com
(END) Dow Jones Newswires
08-01-25 0400ET
