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Manufacturing sector sales will remain lacklustre in 4Q

Manufacturing sector sales will remain lacklustre in 4Q

21 Dec 2020

The manufacturing sector sales will remain lacklustre in the fourth quarter (4Q) amid the resurgence in the number of Coronavirus Disease 2019 (Covid-19) cases that has resulted in the lockdowns in several major economies, analysts opine.

AllianceDBS Research Sdn Bhd (AllianceDBS Research) recapped that Malaysia’s manufacturing sales growth moderated 2.2 per cent year on year (y-o-y) to RM122 billion, as compared to an increase of 3.7 per cent or RM121.2 billion during September.

“Nevertheless, this marks the fifth consecutive month of growth after suffering a severe contraction in March to May,” the research firm said in its manufacturing sales update.

“For the past ten months of 2020, manufacturing sales fell by an average of 3.3 per cent y-o-y.”

“October sales were supported by electrical and electronic products (E&E); food, beverages and tobacco; and transport equipment.

“Subsectors that continued to underperform include textile; wood products; petroleum, chemical, plastic and rubber products; and metal products.”

AllianceDBS Research also gathered that during the month, E&E subsector sales slid to RM38.6 billion, compared to RM39.4 billion in September, mainly dragged by slower sales for computer, electronic and optical products.

“On the other hand, electrical equipment and machinery both rebounded on a m-o-m basis to 3.6 per cent and 0.5 per cent respectively.

“The E&E subsector remains the main driver for total manufacturing sales (representing 32 per cent of total manufacturing sales).”

As for the petroleum, chemical, rubber and plastic subsector, the research firm noted that coke, refined petroleum and chemical products sales recorded a deeper contraction of -21.3 per cent y-o-y during October, to RM16.7 billion.

“However, rubber and plastic products expanded 41.7 per cent y-o-y to RM10.8 billion recording the strongest growth in 2020 so far.”

Meanwhile, the number of employees engaged in the manufacturing sector declined 2.3 per cent y-o-y to 2.19 million persons during October, AllianceDBS Research highlighted.

According to the research firm, this indicates that the recovery momentum within the sector remains fluid; firms are reluctant to take up more employees or expand their production amid the still unresolved pandemic and the recent resurgence of Covid-19 cases that prompted the authorities to re-implement movement restrictions domestically and internationally.

It also highlighted that this is further supported by the firms’ compensation to its employees, salaries and wages paid to the sector’s employees dropping 1.6 per cent y-o-y to RM7.2 billion in October, as compared to RM7.22 billion in the previous month.

On Malaysia’s manufacturing Purchasing Managers’ Index (PMI), AllianceDBS Research noted that it further declined to 48.4 during November; marking the fifth consecutive month of decline (50; neutral).

The research firm said that was mainly due to setback of new orders and production on the back of Covid-19 headwinds.

“Overall, we anticipate that the manufacturing sector sales will remain lacklustre in the fourth quarter amid the resurgence of the virus that has resulted in the lockdowns in several major economies.

“Nonetheless, we believe the recently announced stimulus measures in Budget 2021 and effective distribution of Covid-19 vaccines will serve as positive catalysts for the sector in 2021.”

Source: The Borneo Post