Malaysia’s March manufacturing PMI falls to 48.4, lowest since June 2016

PETALING JAYA: The IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) fell to 48.4 in March, from 48.5 in February, the lowest level since June 2016,

In a statement, IHS Markit pointed out that this signals a sharp slowdown in manufacturing production in Malaysia, as demand- and supplyside factors adversely impacted output volumes.

The latest survey data pointed to the sharpest decrease in new order intakes since data collection began in July 2012.

IHS Markit chief business economist Chris Williamson said the marginal fall in the PMI masks steeper deteriorations in production and new orders trends.

“While supply chain delays are usually seen as a positive development, reflecting rising demand and accelerating economic growth, the current survey is seeing record degrees of supply chain disruption from the coronavirus outbreak, notably from China. These supply shortages are hitting production capacities and constraining growth,”he said.

Williamson added that public health measures aimed at curbing the spread of Covid-19 also led to a fall in demand.

Furthermore, the global pandemic also had a noticeable impact on external markets, as evidenced by a sharp drop in export demand during March.

The rate of decline in the data was broadly in line with that seen in February following the initial negative shock to demand from China.

Meanwhile, supply-side hindrances also restricted production schedules in March, as supplier delivery times lengthened at an accelerated rate that was by far the most severe on record.

“Supply from China should start to improve in coming weeks, helping lift some of the production constraints, but the next problem will be one of slumping global demand for many goods as both business and households around the world spend less due to closures and lockdowns.

“Worse therefore looks set to come in the second quarter, both in terms of exports and domestic demand in Malaysia, but as yet there is great uncertainty as to how long the global slump will persist,” said Williamson.

Although material shortages and domestic currency weakness did lead to a consequent rise in import prices, there were numerous reports from panel members of suppliers cutting their fees due to low input demand.

Overall, the rate of input price inflation slowed to a three-month low.

Meanwhile, the survey data indicated the rate of input price inflation slowed to a three-month low, while output charges fell in March for a third month in a row.

For the month, it reported that purchasing activity fell sharply as lower production requirements and widespread supply chain disruptions deterred firms from buying additional inputs.

In turn, stocks of purchases fell for a third successive month.

The survey found that Malaysian manufacturers also reduced their inventories of finished goods during March.

Looking towards business prospects over the next 12 months,the IHS Markit found Malaysian manufacturers expect further cuts in production, linked to the prospect of sustained supply chain disruption.

““Until more is known about the likely length of the Covid-19 pandemic, businesses are likely to remain highly risk averse, as evidenced already by companies’ future expectations for the year ahead sliding to an all-time low,” said Williamson.

source https://www.thesundaily.my/business/malaysia-s-march-manufacturing-pmi-falls-to-484-lowest-since-june-2016-XB2201330