Malaysia’s PMI rises to 45.6 in May as pandemic effect may have bottomed out

The figure is still below the neutral mark of 50, indicating a still muted manufacturing sector


MALAYSIA’S manufacturing sector posted a sharp spike in May as external demand increased with more countries easing the lockdowns imposed on their citizens and economic activities are slowly returning to normality.

The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI), an indicator of the country’s manufacturing performance, jumped to 45.6 in May compared to April’s record low of 31.3.

The figure, however, is still below the neutral mark of 50, indicating a still muted manufacturing sector.

IHS Markit Ltd chief business economist Chris Williamson said the strong rise of the PMI showed the first major indication that the economic downturn caused by the Covid-19 pandemic appeared to have bottomed out.

“While manufacturing activity continued to fall at a steep rate in May, declines in output and orderbooks were notably less severe than what was seen in the month prior.

“Barring any second wave of infections, the coming months should see signs of at least stabilisation as restrictions to contain the virus are gradually eased both at home and in export markets,” Williamson said in a statement yesterday.

He said despite the anticipation of a return to growth into the third quarter, a recovery to pre-pandemic production and GDP levels would be long and slow. Williamson said export demand in particular looks set to be weak for some time as Covid-19 restrictions will inevitably need to stay in place and continue to dampen economic activity around the world.

IHS Markit stated that weak export demand had persisted in May, weighing heavily on overall orderbooks.

The decline in overseas sales reported was linked to unfavourable economic conditions of key trade partners.

The global critical information provider added that supply-side hindrances remained unprecedented in May and continued to disrupt Malaysia’s manufacturing sector.

Labour shortages at vendors, transportation restrictions and the extension of the Movement Control Order, which began on March 18 and eased beginning May 4, were all reported to have contributed to the sharp lengthening in supplier lead times.

Purchasing activity declined sharply in May as a result of delayed shipments and lower production requirements, which led to a further marked drawdown of pre-production inventories.

Manufacturing employment in Malaysia was held broadly stable during May, with 98% of firms signalling no change in their payrolls, compared to April where staffing numbers fell at the fastest rate on record.

Looking ahead, IHS Markit said there were signs of optimism as survey data pointed to a rise in business confidence.

The Future Output Index rose to a three-month high, with stronger sentiment underpinned by expectations of a recovery in demand.

Malaysia has eased its movement restriction orders with many sectors, in addition to the previously permitted essential sectors, have been allowed to restart operation.