Malaysia’s manufacturing IPI set to expand in coming months: MIDF
04 May 2021
MIDF Amanah Investment Bank said it sees the increase in the IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) for April as a signal that the manufacturing sector’s industrial production index will continue expanding in the coming months, driven by a gradual recovery in domestic demand and growing external demand.
In a note today, it said the risk to the near-term outlook would be a possible retightening of restrictions on the people’s mobility given the recent rise in Covid-19 infections which would mainly constrain the recovery in domestic demand.
“Looking ahead, Malaysian manufacturers expressed the highest level of confidence since August 2019 that output will increase in the next one year, banking on improved sentiment that the vaccination will boost economic recovery,” it said.
Malaysia’s manufacturing PMI surged to a new peak level of 53.9 last month, the highest since the survey began in July 2012, from 49.9 in March 2021, indicating a solid improvement in the performance of the manufacturing sector.
Output grew for the first time in nine months and the pace of growth was the strongest recorded since June 2020, contributed to by the expansion of new order volumes, which registered the first rise since September 2018, increasing at the fastest pace in seven years.
In a separate report, AmBank Research said that although the manufacturing sector was expected to remain healthy, the upwards movement would depend on the number of Covid-19 cases, easing of restrictive measures, vaccine rollout, and backlogs due to supply constraints.
“This will exert price pressure in the near term but should fade once production picks up.
“If manufacturing PMI remains above the 50-point threshold for the remaining months of the second quarter (Q2) of 2021 supported by healthy exports, positive retail activities and a low base, the Q2 gross domestic product is expected to record a strong double-digit growth,” it said.
Meanwhile, Kenanga Investment Bank said in a research note that manufacturing activity was projected to remain on a recovery path on the back of the technology upcycle, further progress in Covid-19 vaccination, and stronger demand amid extended fiscal measures.
“Nonetheless, risks remain, arising from the recent uptrend in daily global Covid-19 cases,” it said.
It maintained its value-added manufacturing growth forecast at 7.5% in 2021 against -2.6% last year, in line with the expected rebound in 2021 GDP to 6.5% versus -5.6% last year.