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IHS Markit : Malaysia’s manufacturing PMI rises to 48.1 in September as downturn in the sector eases

IHS Markit : Malaysia’s manufacturing PMI rises to 48.1 in September as downturn in the sector eases

01 Oct 2021

The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) – a composite single-figure indicator of manufacturing performance – rose to 48.1 in September from 43.4 in August.

IHS Markit said while the latest reading remained below the neutral 50.0 level to signal a further loss of momentum in the sector, the rate of deterioration eased significantly compared to the prior three months.

“The historical relationship between the PMI and official statistics suggests that the recent downturn in the gross domestic product (GDP) will have eased markedly at the end of the third quarter, and the rise in the latest PMI bodes well for improving momentum in coming months,” it said in a research note today. “Both output volumes and new order inflows continued to be scaled back in September, though rates of decline both eased to the softest in four months. Manufacturers commonly reported that strict pandemic restrictions had hampered production capacity and client demand.”

Chief business economist Chris Williamson said the uplift in the PMI for September provides a clear signal that the recent easing of pandemic-related restrictions, both domestically and in many key export markets, is helping drive an improvement in the economy.

He said, citing the IHS Markit’s COVID-19 Containment Index, virus-fighting restrictions have been rolled back in Malaysia to their lowest since April, facilitating production and helping ease the downturn in demand.

Vaccination progress has improved and virus cases were on a downward trend through September, helping drive renewed optimism about the economic outlook and driving business confidence to the highest since April.

“The survey data, therefore, add to signs that the economy has turned a corner at the end of the third quarter following a steep downturn, and the improvements in the survey’s future expectations and order book indicators point to growth picking up in coming months,” he said.

IHS Markit said foreign demand for Malaysian manufactured goods also moderated, but at a softer pace than total new orders as some panelists reported particular pockets of demand in the Middle East and the US.

It said the reduction in new export orders was only mild and eased to the softest since May.

“Malaysian manufacturers reported that employment fell slightly for the second month in a row in September as businesses indicated difficulties in taking on foreign workers amid strict border restrictions.

“The lack of productive capacity, coupled with sustained material shortages, contributed to a survey record increase in backlogs of work,” it explained.

IHS Markit said despite restrictions on the economy and ongoing supply disruption, manufacturers were increasingly confident that output would rise over the coming year, citing hopes that the end of the pandemic would encourage new projects to begin and aid a broad-based recovery in market demand.

“As a result, the degree of optimism reached the highest since April,” it added.

Source: Bernama

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