Myanmar’s manufacturing conditions deteriorated for the first time in eight months in October, with S&P Global’s PMI index falling to 49.0, below the 50.0 no-change threshold.
The downturn was attributed to an accelerated decline in new orders, which resulted in a second month of contracting output.
S&P economist Maryam Baluch said, "Myanmar’s manufacturing sector – which has been grappling with supply-side challenges and a recent lapse in demand – slipped back into contraction territory at the start of the third quarter.”
“Firms again failed to raise their production volumes as new orders fell at an accelerated pace”
MFSM notes that raw material and electricity shortages have also been key factors cited as weighing on the sector this year.
According to S&P’s survey, employment in the sector declined for a fifth consecutive month, with reports of both voluntary leavers and layoffs. However, the rate of job shedding did slow in October to the weakest rate in the current sequence of contraction.
On a positive front, pricing pressures eased in October, with input cost and output charge inflation softening to the slowest rates in 10 and nine months, respectively.
Confidence among manufacturers in their twelve-month outlook was at its worst level since February.
Fears of market instability and ongoing raw material shortages are weighing on expectations, although the majority of firms do not expect production volumes to change in the year ahead.
“Given the uncertain political environment, it is hard to gauge whether demand conditions will continue to sour,” Baluch said.
“However, business confidence, which is an indicator of future production levels, remains historically muted and global headwinds remain. More positively, price pressures cooled notably in October."
MFSM notes that manufacturing output for a range of products improved in Q2 2023 (April-June), according to the latest data published by the Central Statistical Organisation.
Nevertheless, the value of Myanmar’s manufacturing exports has declined sharply this financial year.
According to ministry of commerce data, Myanmar’s manufacturing exports were valued at $4.87bn in H1 FY2023/24 (April-September), down 19% from $6bn in the same period last year.
This comes after manufacturing exports had been recorded at a historically high $10.9bn in FY2022/23 (April-March).
The value of Myanmar’s clothing exports, which account for a vast share of its international manufacturing orders, also declined in the first half of 2023, after spiking last year due to a range of potential factors, including the elevated value of the USD and a temporary influx in orders following the COVID-19 pandemic.
Investment in the manufacturing sector has remained extremely low since the military takeover.
In 5M FY2023/24 (April-Aug), approved foreign investment in the sector was valued at just $63.5m and approved domestic investment valued at just Ks42.3bn ($20.1m at the CBM exchange rate).
