KUALA LUMPUR (Jan 3): ASEAN’s manufacturing sector seems to be off to a “disappointing start” this year as firms scaled down buying activity and cut back on inventory in December last year, according to IHS Markit.

“Survey data showed that output growth slowed and new orders failed to expand for the first time in five months,” said Bernard Aw, principal economist at IHS Markit, which compiles the Nikkei Manufacturing Purchasing Managers’ Index (PMI).

The Nikkei Manufacturing PMI for ASEAN had slipped from 50.8 in November last year to 49.9 in December, signifying stagnating business conditions in the manufacturing sector, according to Nikkei’s report released today.

The declines were led by three out of four ASEAN countries, namely Malaysia, Indonesia, and Singapore, which were also the only countries to see contractionary PMIs.

Aw said that there was little support from external markets as well, as export sales fell at the end of the year.

On top of that, a persistent fall in backlogs highlighted spare capacity, leading to an unsurprising decline in employment, he added.

Backlogs of work fell at the steepest pace for a year in December, while unfinished business has continued to fall every month for the past three-and-a-half years, the report showed.

A softer increase in output and stagnant new order volumes were accompanied by strong cost pressures, which continued to squeeze margins, the report said.

“A bright spot however was a further improvement in business confidence about the 12-month outlook. The Future Output Index rose to the highest level since March.”