JETRO polls the companies to measure year-on-year changes, expressed as diffusion indices, in their business outlooks for the current month and the next two to three months going forward.
Overall current business sentiment for the five ASEAN countries included in the survey declined dramatically in February, plunging 7.3 points to move the index into negative territory (now at -6.3). The index for firms in ASEAN's electric/electronics equipment sector recorded its lowest since August 2005, slipping to -26.3, due to production/inventory adjustment and decreasing demand in overseas market brought on by strong local currencies (against the US dollar). By country, the index for Thailand declined 19.0 points in February (to -31.9), recording its lowest level since the survey began in June 2001. This drop was mainly attributed to decreasing domestic demand in the country's transport equipment sector, as uncertainty over future business prospects made consumers cautious about buying durable consumer goods such as automobiles. In January, Thailand registered its lowest monthly new car sales figure in the past four years, prompting the Bank of Thailand to express concern that stagnant domestic demand could slow economic growth.
Overall forward business sentiment for the ASEAN region rose 5.1 points in this month's survey (now at -1.2), on the back of improving indices in such sectors as transport equipment (now at 22.1) and transport, communications, commerce and services (now at 6.5). Firm's expectations for a recovery in overseas demand for electric/electronics equipment, however, remained low.
Overall current business sentiment for China and North Asia improved 1.2 points over the previous month in January (now at 2.5). In China, the index for firms in the country's transport, communications, commerce and services sector slipped to -4.0, mainly due to stagnant distribution in North China; the overall index for mainland China, however, remained strong (now at 16.6). The index for firms in Taiwan's transport equipment sector remained depressed (now at -66.7) in February, due to weak automobile sales in the domestic market. Taiwan saw its index remain in negative territory for eleventh straight month (now at -27.6) in this latest survey.
Overall forward business sentiment for China and North Asia improved 2.7 points (now at 5.2) in February, reflecting improved sentiment in Hong Kong (now at 15.5) and mainland China (now at 13.9) but continuing depressed sentiment in both Taiwan and ROK, where indices now stand at -17.4 and -13.9 respectively.
A total of 746 replies were received in ASEAN countries (128 in Indonesia, 89 in Malaysia, 190 in the Philippines, 223 in Singapore and 116 in Thailand), 187 in China (34 in the North, 52 in the Northeast, 69 in the East and 32 in the South); 123 in Hong Kong; 36 in the ROK and 98 in Taiwan.
Current Business Sentiment
Business sentiment in February among Japanese companies operating in Asia went into the negative range for ASEAN as a whole, influenced by overall unfavorable conditions in electric and electronic machinery, combined with the decline of business sentiment in Thailand to its lowest point ever. In China and North Asia, there was continuing sluggishness in Taiwan and the Republic of Korea, but China and Hong Kong held steady. As a result, figures rose somewhat for the region as a whole.
ASEAN 5
The February DIs for ASEAN as a whole showed a significant decline of 7.3 points over the previous month, and turned down into the negative range (1.0 in January to -6.3 in February). There were inventory adjustments in electric and electronic machinery in the ASEAN countries, coupled with rises in local currencies against the dollar that caused a slump in overseas demand. The DIs for electric and electronic machinery in ASEAN as a whole therefore sank to -26.3, the lowest figure since August 2005.
Looking at the DIs by country, we see that uncertainty about the outlook in Thailand caused consumers to take a cautious attitude toward purchases of passenger cars and other durable consumer goods. As a result, domestic demand for transportation machinery declined, and the figure for Thailand fell 19.0 points from the previous month to reach the lowest level ever (-12.9 in January to -31.9 in February). On a monthly basis, unit sales of automobiles in Thailand for January 2007 actually fell to their lowest point in the past four years. The Bank of Thailand has also expressed concern over the business slowdown caused by declining domestic demand.
The outlook DIs for two to three months ahead show ASEAN as a whole rising by 5.1 points over February (from -6.3 in February to -1.2). Overseas supply and demand in electric and electronic machinery is expected to be sluggish overall, but the outlook has turned favorable in transportation machinery (from 17.4 in February to 22.1), as well as in transport, communications, commerce and services (from -1.9 in February to 6.5) in the non-manufacturing industries, contributing to the rise for ASEAN as a whole.
China and North Asia
The February DIs for China and North Asia as a whole rose by 1.2 points over the previous month, to 2.5 (1.3 in January to 2.5 in February). Looking by region, we find that the slowdown in physical distribution activity centered in the northern region of China affected transport, communications, commerce and services, where the figures declined to -4.0. China as a whole, however, continued to hold steady, at 16.6. Meanwhile, slack automobile sales and other factors in Taiwan caused the figure for transportation machinery to remain sluggish at -66.7. The figures for Taiwan as a whole remained in the negative range for the 11th consecutive month, at -27.6.
The outlook DIs for two to three months ahead indicated that business sentiment would remain sluggish in Taiwan (to -17.4) and the Republic of Korea (to -13.9). However, the figures for Hong Kong (15.5) and China (13.9) enabled China and North Asia as a whole to recover 2.7 points over February (from 2.5 in February to 5.2).
