Myanmar manufacturing activity in steep fall as unrest keeps factories shut

Output and new order volumes contract at sharpest rates on record, according to IHS Markit report

Demonstrators with a defaced image of Myanmar military chief Gen Min Aung Hlaing. The country's manufacturing sector suffered in February as anti-coup protests forced factories to remain shut. AP

Myanmar’s manufacturing output fell to a five-year low in February as protests sparked by a military coup led to factory closures.

The country's IHS Markit purchasing managers' index, which tracks the performance of the manufacturing sector, fell from 47.8 in January to 27.7 last month, well below the 50-point mark that separates growth from contraction.

Output, new orders, purchases and stocks of both raw materials and finished goods all shrank at record levels due to the factory closures, transport bottlenecks and falling demand, according to the report that was released on Monday.

The decline was the steepest since the IHS Markit survey began over five years ago.

Output, new orders and stocks account for 65 per cent of the headline PMI figure.

“The latest political developments represent a fresh setback for Myanmar’s goods-producing sector,” said IHS economist Shreeya Patel.

“The state of emergency declared on February 1 added to the challenges facing Myanmar’s manufacturing sector, with February’s PMI figure heralding a record deterioration in operating conditions.”

Hundreds of thousands of protesters have demanded that Aung San Suu Kyi’s elected government be restored after last month’s military coup.

At least 18 people were killed on Sunday when police fired on protesters on the bloodiest day of the demonstrations, according to the UN human rights office.

The state of emergency imposed on February 1 disrupted factory operations and hit demand.

“While much of 2020 had brought a series of contractions during the global Covid-19 pandemic, recent months had shown signs of recovery, with the headline figure inching towards stability,” said Ms Patel.

Political upheaval reversed the start of an economic rebound. About 70 per cent of companies in Myanmar reported lower output as factory operations ground to a halt.

As a result of lower production, companies cut staffing and workers returned to their hometowns, amid the declared state of emergency.

Companies also reported fewer new orders and client business closures during the month, resulting in the fastest decline in the five-year history of the survey and surpassing the previous lowest point reached last October, the report said.

Employment contracted at the third-fastest pace on record. Supplier delivery times lengthened, cushioning the overall reduction in the PMI figure, the report said.

While demand was subdued overall, a combination of insufficient workforce numbers and factory closures led to a “modest accumulation” of backlog halfway through the first quarter.

Companies “drastically” scaled back their purchases due to the record decline in new work.

Purchase volumes fell at their steepest pace in the history of the series while stock purchases also contracted at a record rate. A shortage of materials and unfavourable exchange rate movements inflated the cost of raw materials, according to the survey.

Companies passed on the cost burden by raising their selling prices, albeit marginally.

Raw material shortages and transport bottlenecks were often linked to a deterioration in sales performance, one of the worst on record for any month since the survey began.

The sentiment of companies regarding output over the next 12 months remained positive.

However, the degree of optimism tapered off from January’s 11-month high to its weakest in five months.

“There are few positives to be drawn from latest data, although firms remain slightly confident that production ­volumes will increase over the next 12 months,” said Ms Patel.