Southeast Asia Manufacturing Rebounds in July as Factory Orders Recover

Southeast Asia’s manufacturing sector regained momentum in July 2026, with stronger new orders, higher production and improving business confidence lifting regional factory activity from an 11-month low.

The S&P Global ASEAN Manufacturing Purchasing Managers’ Index (PMI) rose to 52.8 in July from 50.5 in June, moving further above the 50-point level that separates expansion from contraction.

The rebound followed a softer period between March and June, when manufacturing activity across the region was affected by disruption linked to the Middle East conflict and pressure on supply chains.

New Orders and Production Strengthen

Manufacturing conditions improved as growth in both new orders and production accelerated during July.

Companies also increased purchasing activity and employment as production requirements strengthened. Business confidence improved at the same time, with manufacturers recording their strongest optimism about future production growth in more than three years.

S&P Global said easing supply-chain pressures, including improvements around oil flows, helped ASEAN manufacturing recover from the disruption experienced earlier in the year.

Regional output growth accelerated to its fastest pace since February.

Thailand Leads Regional Manufacturing Growth

Thailand recorded the strongest manufacturing performance among Southeast Asian economies in July, with its PMI reaching 54.2.

Vietnam followed with a reading of 52.9, continuing the country’s manufacturing expansion.

Other ASEAN economies also remained in expansion territory, with Myanmar the only market covered by the regional survey to register contraction, at 49.3.

S&P Global noted that Thailand posted its strongest manufacturing growth of 2026 so far, while Vietnam recorded one of its fastest rates of expansion in the survey’s 15-year history.

Indonesia also recorded one of the region’s largest month-on-month improvements, further supporting the ASEAN manufacturing recovery.

Manufacturing Recovers From Middle East Disruption

The July improvement comes after several months of weaker manufacturing conditions linked to geopolitical disruption.

Between March and June, Southeast Asian factories faced pressure from supply-chain interruptions, higher energy costs and uncertainty around international trade routes.

S&P Global economist Maryam Baluch said ASEAN manufacturing appeared to have moved beyond the softer period recorded between March and June.

Supply conditions also showed signs of stabilising in July, although global shipping and energy markets continue to face disruption related to the Middle East.

Across global manufacturing, supplier delays and input cost pressures eased during the month but remained elevated compared with historical levels.

AI Electronics Demand Supports North Asian Factories

Manufacturing activity also remained positive across major North Asian production hubs.

Factories in the region reported stronger orders as Middle East tensions eased and demand for AI-related electronics continued to support technology manufacturing.

The continued expansion of artificial intelligence infrastructure is supporting demand for semiconductors, electronics and manufacturing equipment across several Asian economies.

Japan was among the strongest-performing developed manufacturing markets in July, with factory output growth reaching its highest level since February 2012.

China moved in the opposite direction, with its official manufacturing PMI falling to 49.2 in July, indicating contraction.

ASEAN Manufacturing Enters Second Half With Stronger Momentum

The July PMI results indicate that Southeast Asian manufacturing entered the second half of 2026 with stronger operating conditions than seen during the previous four months.

Rising production, new orders, purchasing activity and employment point to improving factory demand across the region, while stronger business confidence suggests manufacturers are becoming more positive about the months ahead.

However, geopolitical uncertainty, energy prices and international supply-chain conditions remain potential risks.

For now, the rebound across Thailand, Vietnam, Indonesia and other ASEAN manufacturing markets suggests the region’s industrial sector has regained momentum after the disruption experienced earlier in the year.