PMI falls to survey low amid Covid-19 pandemic

PETALING JAYA: The IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) recorded 31.3 during April, down from 48.4 in March, pointing to a sharpest decline in business conditions since data collection began in 2012, as measures implemented to tackle Covid-19 caused firms to either suspend production or operate well below full capacity.

Lockdown measures both domestically and overseas had a considerable impact on demand, which fell at a survey-record pace. Supplier deliveries were also heavily affected by the movement control order (MCO), restricting firms’ ability to purchase vital materials.

IHS Markit chief business economist Chris Williamson said it was no surprise to see that measures taken to contain the Covid-19 outbreak led to a sharp fall in manufacturing activity in April.

“Domestic demand was hit hard by containment measures and production at many firms was curbed by business closures. Export demand meanwhile collapsed as governments around the world took drastic action to prevent healthcare systems from being overwhelmed,” he said.

Despite that, he noted that it was encouraging to see only a modest fall in employment, as the vast majority of firms held on to staff to safeguard longer term production capacity.

In April, the most commonly cited factor weighing on the manufacturing economy was the implementation of restrictions both at home and in exports markets to contain the spread of the coronavirus, which severely restricted demand and often meant goods producers operated well below full capacity.

“New orders fell sharply during April as a result of the global Covid-19 pandemic, which had resulted in lockdowns being implemented at both domestically and overseas. Some companies indicated that key clients had shut down.

Supply chain delays also impeded manufacturers in April, with firms recording the sharpest month-to-month lengthening in delivery times since data collection started almost eight years ago.

IHS Markit said the combined effect of lower production requirements and longer vendor delivery times led to a sharpest drop in purchasing activity in the survey history, and stocks of inputs also fell markedly as firms tightened their inventories to contain costs.

Looking ahead, there are signs of stabilisation in business expectations for the next 12 months.

Williamson said with increasing numbers of governments looking at ways to ease Covid-19 restrictions, it’s likely that the rate of export decline will soon moderate, helping drive a recovery in production.

source https://www.thesundaily.my/business/pmi-falls-to-survey-low-amid-covid-19-pandemic-GC2370686