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Malaysian manufacturers signal first employment expansion in 12 months — IHS Markit

Malaysian manufacturers signal first employment expansion in 12 months — IHS Markit

01 Apr 2021

KUALA LUMPUR (April 1): Malaysian manufacturers signalled the first expansion in employment levels in 12 months in the latest IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) survey period in March 2021 as preparation for orders in the future reportedly required additional capacity and pushed the seasonally-adjusted employment index to the highest since April 2019 as the global economy contended with the impact of the Covid-19 pandemic.

In a statement today, IHS Markit said despite headwinds from supply shortages and ongoing Covid-19 related issues, Malaysian manufacturers displayed a stronger degree of optimism regarding the outlook for output in the coming year.

“Firms recorded the highest level of positive sentiment for six months in March. Panel members attributed the improved outlook to hopes that a recovery in both domestic and external demand would boost production levels and sales over the next 12 months.

“Malaysian manufacturers took a further step on the path to recovery in March as operating conditions broadly stabilised during the month. Although production levels and new orders moderated further due to weak demand and ongoing supply chain disruption from the Covid-19 pandemic, employment levels returned to expansion territory for the first time since March 2020 as manufacturers grew increasingly optimistic about the year-ahead outlook, with hopes that an end to the pandemic would give rise to a wider recovery in demand.

“The headline IHS Markit Malaysia Manufacturing PMI — a composite single-figure indicator of manufacturing performance — rose from 47.7 in February to 49.9 in March. The latest reading pointed to a stabilisation in operating conditions, with the headline index reaching its highest since July 2020,” IHS Markit said.

A PMI reading of above 50 indicates an overall increase compared to the previous month, while a reading of below 50 shows an overall decrease, according to IHS Markit.

Looking at the historical relationship between the PMI and official statistics, the latest reading is representative of annual growth in both industrial production and gross domestic product (GDP), although the survey indicates that the manufacturing sector is only gradually recovering from the impact of the Covid-19 pandemic, according to IHS Markit, indicating that the IHS Markit Malaysia Manufacturing PMI was compiled from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers between March 12 and 25, 2021.

“While survey gauges of output and new orders both rose in March, the latter notably hitting a five-month high, both remained subdued. Panellists noted that order inflows continued to be dampened by the impact of the Covid-19 pandemic, hitting both consumer and corporate demand. Foreign demand for Malaysian manufactured goods also fell back, albeit with the pace of the reduction easing to the softest recorded since June 2020 as some firms reported returning orders in Asia and the Americas.

“Input cost, meanwhile, increased for the 10th consecutive month in March, reflecting higher prices for a broad variety of raw materials and higher freight cost. The overall rate of input cost inflation accelerated to the fastest in nearly four years. Manufacturers sought to partially pass these higher costs on to clients in the form of higher output charges, which rose at the quickest pace since March 2017,” IHS Markit said.

Shortages of materials, as well as delays in receiving shipments, caused average supplier lead times to lengthen to the greatest extent since May 2020, according to IHS Market.

At the same time, inventory levels fell as businesses remained reluctant to hold onto stocks of raw materials and finished goods in the latest survey period, it said.

“Moreover, some firms also reported that supply delays had hindered restocking efforts and, in some cases, curtailed production. Backlogs of work consequently increased for the first time since August 2018, rising to the greatest extent in four years,” IHS Markit said.

Source: The Edge Markets

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