Burma’s Manufacturing Sector Inches Forward in February

By The Irrawaddy 1 March 2017

RANGOON — Burma’s manufacturing sector continued on a positive trend during February, but optimism among manufacturers was at its lowest in over a year, according to a survey.

New domestic and international orders and a rise in output helped account for the positive trend, according to the Nikkei Myanmar Manufacturing Purchasing Managers’ Index (PMI).

The PMI measures the economic health of the manufacturing sector based on five main indicators, including new orders, production, inventory levels, supplier deliveries, and the employment environment.

“New orders increased at the sharpest rate since the beginning of last year, with anecdotal evidence pointing to new business wins both domestically and abroad,” according to a statement by IHS Markit, which conducted the research.

There were also reports of a greater demand generated by government projects, it said.

Adjusted for seasonal factors, Burma’s PMI inched up to 51.9 in February, from 51.7 the previous month. A figure above 50 indicates economic expansion, while a figure below 50 is an indicator of contraction.

The growth of new business meant that manufacturers took on extra staff in February, but at a modest rate.

Purchasing activity increased in February after having either fallen or broadly stagnated since June last year, but both pre- and post-production inventories continued to decline. Survey participants indicated that they had drawn on existing stocks in order to satisfy incoming new work, according to the statement.

The report said that spare capacity remained evident among manufacturers and price pressures were strong, with companies largely blaming a volatile exchange rate for higher costs.

Despite the overall uptick in business conditions, manufacturers were the least optimistic regarding future outputs since the survey began in December 2015.

“The vast majority of respondents expect their output to be the same in a year’s time,” according to IHS Markit.

Commenting on the month’s results, Paul Smith, senior economist at IHS Markit, said the latest data presented a mixed picture of Burma’s manufacturing sector.

“On the one hand, business conditions improved for the second straight month and at the fastest pace in over a year. There was robust growth of output and new work, alongside a further round of job creation.”

However, there remained clear room for improvement.

“Backlogs of work continued to fall substantially, pointing to spare capacity within the sector. Moreover, firms continue to see their margins suppressed. Input costs rose sharply amid exchange rate instability, whereas selling prices nearly stagnated thanks to competitive pressures.”

Those concerns appeared to have offset optimism around the current upturn, he added.

“Business sentiment is running at its weakest in the series,” Smith said.