Malaysian manufacturing sector declines at slower pace


Business conditions across Malaysia’s manufacturing sector deteriorated at a slower pace in June, with the weakest manufacturing Purchasing Managers’ Index (PMI) score reported since March.

The headline Nikkei Malaysia Manufacturing PMI rose from 47.6 in May to 49.5 in June, below the neutral 50 threshold.

“June data indicated that manufacturing conditions in Malaysia deteriorated at the slowest pace since March, as the rates of contraction in output and new business eased to the slowest since March.

“An anecdotal evidence highlighted a weak underlying demand for Malaysian goods from both the domestic and international markets,” IHS Markit Ltd economist Aashna Dodhia said in the report.

The research noted that output declined further in June, but at a slower pace. Where a decrease was registered, panellists commented on unfavourable economic conditions.

In line with the trend of output, new business declined for the fifth consecutive month in June. The fall in new business was linked to the lacklustre demand, according to the anecdotal evidence. As such, the rate of decline moderated to the slowest since March.

IHS Markit also said new export orders declined at the end of the second quarter amid reports of weaker demand from the international market. The latest downturn was the slowest since February.

In addition, Malaysian companies have reported a renewed expansion in payroll numbers, despite a sustained period of decline in output and new orders. However, the rate of job creation was marginal.

On the price front, IHS Markit said firms faced higher input costs during June, thereby stretching the current period of inflation to 41 months. Thus, input cost inflation eased for the third successive month to the weakest since March 2015.

Meanwhile, there was no change in average selling prices during June, ending a 19-month sequence of inflation.

The firm said average lead times also lengthened for the third month in succession during June. That said, the degree of deterioration was modest.

Raw material shortages contributed to delays across Malaysia’s supply chains.

Hence, Malaysian manufacturing companies were discouraged from engaging in input buying for the seventh month in succession during

June. The rate of decline eased to the slowest since February.

Pre-production inventories declined for the seventh consecutive month in June with panellists having commented on weak demand requirements.

“There were some reports that the abolition of the Goods and Services Tax alleviated pressure on firms’ costs burdens. Subsequently, input cost inflation moderated to the slowest since March 2015.

“Malaysian manufacturing companies retained positive forecasts for output in the next 12 months. That said, business confidence eased to the weakest since October 2017,” Aashna added.


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