Malaysia's manufacturing health continues improving in May: IHS Markit

By Farah Adilla - June 2, 2021 @ 9:08am

KUALA LUMPUR: The headline IHS Markit Malaysia Manufacturing Purchasing Managers' Index (PMI) – a composite single-figure indicator of manufacturing performance – eased from a record high 53.9 in April to 51.3 in May.

In a statement yesterday, IHS Markit said the latest reading signalled a further improvement in the health of the sector, and the first time back-to-back monthly improvements reported since mid-2018.

It said businesses signalled that the recovery in the Malaysian manufacturing sector continued in May, as firms reported a second consecutive expansion of new orders.

However, IHS Markit said stricter measures to combat a renewed surge in Covid-19 infections had an adverse impact on production volumes, which moderated following a solid expansion in April.

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It added that uncertainty about the speed of the economic recovery from the pandemic dampened overall sentiment among manufacturers, though firms remained optimistic on balance that output would increase over the coming 12 months.

"The recent rise in Covid-19 cases both at home and in many key overseas markets led to further disruptions during May, which dampened production growth and led to further supply chain delays.

"Despite the easing of growth in May, the PMI continues to suggest that the second quarter will see the strongest manufacturing upturn since the survey began in 2012, but the concern is that the virus could continue to weaken growth in coming months.

"Future growth expectations took a knock in May, as the renewed wave of infections served as a reminder that the virus remains a significant risk to the outlook," IHS Markit chief business economist Chris Williamson said.

Further, IHS Markit said new order inflows rose for the second month in a row in May as manufacturers commonly reported strong local demand for goods.

"That said, the pace of the expansion eased from April as the latest restrictions dampened client confidence.

"As a result, output volumes were scaled back, though the pace of moderation was only marginal.

"At the same time, new export orders lost momentum in May as Covid-19 related disruptions in international markets intensified as infections rose in many countries," it said.

IHS Markit said despite new restrictions and ongoing supply disruption, manufacturers remained confident that output would rise over the coming year, citing hopes that the end of the pandemic would induce a recovery in domestic and external demand.

"That said, the degree of optimism was the lowest for four months," it said.