Malaysia’s Manufacturing PMI hits 4-month high in September

by RAHIMI YUNUS/ pic credit: ihsmarkit.com

THE headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) rose to a four-month high of 47.9 in September, up from 47.4 recorded in August.

This is the first time since April that the headline index has increased, IHS Markit said in a report yesterday.

At current levels, the PMI is broadly indicative of annual GDP growth of between 4.5% and 5%, according to historical comparisons.

The survey’s output index picked up slightly in September, but held close to the levels seen across the third quarter (3Q), which indicates a stable production trend.

At present levels, the survey’s output index is consistent with annual production growth of just over 4%, based on comparable historical official data on Malaysian manufacturing.

Demand conditions showed some signs of stabilisation in September, which contributed to a rise in the new orders index.

However, challenges remained apparent as clients held out for price discounts amid strong competitive pressures, while external demand remained fragile with orders from key export markets dropping.

Meanwhile, backlogs declined for 13 consecutive months as some companies, which reported the need to focus on productivity gains, took the opportunity to use old stock to fulfil unfinished work.

Firms have forecasted greater demand from domestic and external clients, as well as the planned development of new products. However, optimism moderated due to the global economic environment and geopolitical concerns.

“With global headwinds intensifying, it’s no surprise to see Malaysia’s manufacturers continue to struggle in September, but there are at least some encouraging signs of upward momentum being regained.

“The September survey comes on the heels of global PMI data showing that worldwide economic growth slipping closer to three-year lows mid-way through the 3Q, led by the steepest drop in global trade since 2012. Geopolitical concerns and trade wars are dampening business activity around the world, with key markets such as the US and eurozone showing increased signs of stress,” IHS Markit chief business economist Chris Williamson (picture) said in the report.

While businesses generally remain upbeat about expanding production in the coming year, Williamson said September saw some loss of optimism.

Therefore, it will be important for companies to watch global developments to ascertain whether growth momentum can be sustained as they head into the 4Q, he added.