"For now, PMIs continue to be capped by weakened demand - mostly external, but also domestic,” Barclays said, adding that “confidence in the short-term business environment remains low, mirrored in the employment sub-index, which remains deep in contraction territory for all of Southeast Asia."

"It is likely that business sentiment is largely impacted by external demand conditions - the export orders sub-index remains 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 lifting of restrictions last month, Barclays noted.

However, it said the improvement in Thailand has been much slower than expected, despite its faster reopening.