Tough demand conditions weigh on PMI in July

KUALA LUMPUR: The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index™ (PMI®) – a composite single-figure indicator of manufacturing performance – was largely unchanged in July, falling only marginally from 47.8 in June to 47.6.

At current levels, the PMI is broadly indicative of annual gross domestic product (GDP) growth of 4.5%, according to historical comparisons.

According to IHS Markit, the seasonally adjusted Output Index increased for the first time since April during the latest survey period.

“Firms reported a net inflow of new business from abroad for the first time since April, albeit only marginal, with the US, Japan and Turkey mentioned as particular sources of higher export demand,” it said in a statement today.

The rise in exports helped keep the seasonally adjusted New Orders Index above the weak levels seen at the start of the year, but overall demand conditions remained challenging.

Anecdotal evidence suggested that increased competitive pressures had made securing new work more difficult, and that concerns over global economic growth and geopolitical concerns remained headwinds.

However, when looking towards the coming 12 months, Malaysian manufacturers anticipate order book volumes to pick up and support production growth, said IHS Markit, who noted Malaysia’s remarkably resilient business confidence despite external headwinds, though the July survey saw optimism pull back from June’s 68-month peak.

The latest survey data also highlighted firms taking a more cautious approach to staffing levels, as employment was reduced in July. Difficulties in retaining and hiring staff were also mentioned as a factor behind the weaker jobs numbers.

The cautious approach was also apparent in purchasing and inventories data. Buying levels were tapered in July, as has been the case since last October, while stocks of inputs and semi-manufactured items were also pared back. According to anecdotal evidence, existing stocks were sufficient to meet the current operational requirements.

Elsewhere, input prices continued to rise, propped up by unfavourable exchange rate variation as well as reports of increased charges from suppliers and greater utility costs.

“However, the rate of input price inflation eased to a three-month low from May’s recent peak to hint at an easing of supply chain inflationary pressures. At the same time, Malaysian manufacturers raised their output charges only marginally in July, in most cases to partly share greater cost burdens with customers,” said IHS Markit.

IHS Markit chief business economist Chris Williamson said the pull-back in the PMI from the higher levels seen early in the second quarter comes at a time of weakening global economic growth and rising worldwide geopolitical concerns.

He said the global PMI surveys have indicated the slowest pace of worldwide GDP expansion for three years in recent months, with deteriorating trade flows and reduced business investment acting as major drags.

Williamson said the positive net balance of companies expecting output to continue to rise over the coming year is an encouraging sign of resilience in the face of global headwinds, with optimism commonly being fueled by new projects, expansion plans and more aggressive marketing.

source https://www.thesundaily.my/business/tough-demand-conditions-weigh-on-pmi-in-july-CB1201466