Research firms expect Malaysia's manufacturing activity to remain on recovery path - MIDA | Malaysian Investment Development Authority
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Research firms expect Malaysia’s manufacturing activity to remain on recovery path

Research firms expect Malaysia’s manufacturing activity to remain on recovery path

02 Jun 2022

Kenanga Research has retained its outlook for the manufacturing activity to remain on a recovery path, as the country transitioned to the endemic phase, despite the relatively stagnant performance in May.

Malaysia’s Manufacturing Purchasing Managers’ Index (PMI) slowed to 50.1 in May 2022 from 51.6 in April, a two-month low.

“Nevertheless, our growth projection remains susceptible to several downside risks, primarily linked to China’s zero-Covid policy and the Russia-Ukraine crisis, which have led to global supply disruptions and fuelled global inflation amid elevated commodity prices.

“However, the adverse effect is expected to be mitigated by various policy support, as well as Malaysia’s export diversification and robust demand from key trading partners. Against this backdrop, we maintain our 2022 gross domestic product (GDP) growth forecast of between 5.0% and 5.5%,” it said in a note on Thursday (June 2).

On May 2022 PMI, MIDF Research said Malaysia’s manufacturing sector activities were broadly unchanged from the previous month as the manufacturing PMI dropped to 50.1, mainly due to weaker new orders.

It said manufacturers indicated that rising prices and supply shortages were the factors which dampened demand and their productive capacity, and in view of slowing demand, they scaled back production volume for the fifth consecutive month.

Consequently, it said manufacturing employment also moderated amid continued challenges to hire foreign workers.

Meanwhile, MIDF highlighted that disruptions in the supply chain also affected goods-producing firms, with renewed lockdowns in China adding to the shortages of raw materials and limited freight capacity.

“Price pressures also continued to affect local manufactures as supply constraints led to higher input costs, and firms have no choice but to increase selling prices,” it said.

On positive note, the research house pointed out that manufacturers expect the outlook to improve with easing restrictions and end of pandemic to lead to higher demand and supply conditions.

“Going forward, we expect the improving demand both domestic and external, and supply conditions, on the back of further reopening of Malaysia’s economy and easing of lockdown measures in China, will support local production activity in the coming months.

“Nevertheless, the increased costs and supply constraints will continue to affect local businesses and potentially push general prices higher,” it added.

Source: The Edge Markets