Malaysia’s manufacturing production moderates in August

PETALING JAYA: Malaysian manufacturing production stabilised in August, sustaining the recovery from the Covid-19 downturn with the headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) dipping to 49.3 in August from 50 in July.

Although signalling a moderation of business conditions, the latest reading was above the series average of 49. Moreover, given the relationship between the PMI and official figures, latest data was representative of increases in both gross domestic product (GDP) and official manufacturing production.

IHS Markit chief business economist Chris Williamson said for the expansion of manufacturing output to have lost some momentum from the initial rebound from lockdown should come as no surprise, but the extent to which demand – and export orders in particular – continues to deteriorate is a concern.

“A weakening of business sentiment about prospects for the year ahead is likewise worrying. Although it’s encouraging to see the number of optimists continue to exceed pessimists, suggesting that firms are on balance expecting to grow in the coming year, expectations remain well below pre-pandemic levels, highlighting that confidence remains badly dented by the pandemic,” he said.

According to the survey, respondents indicated that demand continued to recover from the worst of the pandemic-related downturn, with the pace of moderation broadly in line with that seen in June and July.

The new orders index remained much higher than seen during the nadir of the Covid-19 downturn in April as some respondents saw ongoing improvements in demand following the loosening of virus-related restrictions. That said, evidence from panel members suggested that customer demand remained relatively weak, notably in foreign markets.

New export orders continued to deteriorate, and to a greater extent than total new business amid ongoing restrictions in a number of export markets.

“Latest data pointed to ongoing spare capacity in the sector as backlogs of work were reduced solidly. The lack of capacity pressure and efforts to reduce costs led firms to scale back employment. The resulting reduction in staffing levels was the sharpest since the survey began in July 2012,” IHS Markit said.

Cost pressures were often the result of raw material shortages, and overall, firms signalled a rise in input prices, albeit one that was the softest in the current three-month sequence of inflation.

Material shortages, and particular issues receiving imported goods due to Covid-19 led to a ninth successive monthly lengthening of suppliers’ delivery times. There were signs of pressure on supply chains softening, however, with lead times lengthening to the least degree since January.

Purchasing activity was reduced modestly, following a rise in July. Meanwhile, stocks of both purchases and finished goods were broadly unchanged, thereby ending periods of depletion stretching back seven and 31 months respectively.

source https://www.thesundaily.my/business/malaysia-s-manufacturing-production-moderates-in-august-NK3783078