GRADUAL improvement in the purchasing managing indices (PMI) across South-east Asia shows some return to normalisation, but a sustained recovery is still far away, Barclays Research suggested in a report on Monday.
"For now, PMIs continue to be capped by still-weak demand - mostly external, but also domestic. Confidence about the business environment in the near-term remains low, mirrored in the employment sub-index, which remains deep in contraction territory for all of Southeast Asia," Barclays said.
"It is likely that business sentiment is largely impacted by external demand conditions - the export orders sub-index remains materially below pre-Covid-19 levels, even for countries that showed large month-to-month improvement in the index reading," it added.
The PMI reading for July in Indonesia and Thailand showed improvement over June's data following some lifting of restrictions last month, Barclays noted.
However, it said the improvement in Thailand has been much slower than expected, despite its faster reopening.
"This likely reflects still weak domestic demand amid increased precautionary consumer savings, as a large part of the consumer base has been severely impacted by reduction of activity in the travel, tourism and hospitality sectors," Barclays said.
Meanwhile, the Philippines' manufacturing PMI declined to 48.4, down from 49.6 in June, likely reflecting renewed Covid-19 tightening rules in some parts of the country such as Cebu, it said.
As Manilia moves back into a tighter lockdown from August 4, Barclays said it is expecting the Philippines' PMI to fall deeper into contraction territory in August.
For now, only Malaysia seems to be "treading water around the 50 level", Barclays said. Malaysia's PMI crossed into positive territory in June with a reading of 51, although this inched down to 50 in July.