by S BIRRUNTHA / pic by TMR FILE
THE Malaysian manufacturing sector has continued to lose its recovery momentum midway through the fourth quarter (4Q) of the year.
The IHS Markit Purchasing Managers’ Index (PMI) dipped 48.4 in November from 48.5 in October, fractionally for a fifth month in a row.
IHS Markit chief business economist Chris Williamson (picture) said manufacturers continue to battle against Covid-19 headwinds, with renewed restrictions dampening domestic activity, while lockdowns in other countries have limited export growth and caused further delays in the supply of materials.
“Crucially, however, the impact is far less severe than seen earlier in the year, suggesting the hit to 4Q GDP will be much less marked than we saw in the 2Q.
“Business optimism about the year ahead is also running considerably higher than seen earlier in the year, albeit below the recent peak seen in September, which bodes well for business spending — especially investment — to show greater resilience,” he said in a report yesterday.
According to IHS Markit, businesses continued to scale back production, while new order inflows moderated.
It said a rise in Covid-19 cases both domestically and around the world has led to reducing demand for Malaysian manufactured goods, while supply chains struggled to deliver inputs in a timely manner.
The research house also said output in the manufacturing sector had stagnated as both the Malaysian economy and key international markets combated a resurgence in Covid-19 cases.
Both production and new order volumes moderated in November, yet the pace of deterioration was markedly softer than in April.
IHS Markit also noted that greater restrictions have led to a fall in new export orders, which reduced faster than overall new business inflows.
“A resurgence of infections in key markets such as India was cited as a contributor to ongoing weakness in exports, which fell for the 11th month running.
“Positively, staffing levels among Malaysian manufacturers edged towards stabilisation in the latest survey period. The rate of job shedding eased to the softest since May and was marginal overall,” it added.
IHS Markit said as demand was subdued, firms took the opportunity to reduce outstanding business, however, capacity pressure showed signs of emerging as backlogs of work declined at the softest pace since June.
In response to slower production and order volumes, it said Malaysian manufacturing businesses scaled back purchasing activity.
Additionally, holdings of raw materials and semi-finished goods also dipped midway through the final quarter of 2020, as did stocks of finished products.
Moving forward, the research house said Malaysian manufacturers were increasingly optimistic regarding the 12-month outlook for production.
It said positive sentiment was signalled for the eighth month running amid hopes that an end to the pandemic would bring about a return to normal operating conditions and boost production.
In a separate report, IHS Markit shared that the Asean manufacturing conditions stabilised in November, ending an eight-month-long downturn.
November’s PMI stood at 50 from 48.6 in October, signalling stabilisation in the health of the Asian manufacturing sector.
Malaysia recorded a fourth consecutive contraction with a PMI of 48.4.
It said regional output rose for the first time since January, at the quickest rate in nearly two and a half years, amid renewed expansion of orderbook volumes.
According to IHS Markit economist Lewis Cooper, November data provided a small glimmer of positivity on the Asean manufacturing sector.
He added that output rose for the first time since January, and at the quickest pace for nearly 21⁄2 years, amid a renewed increase in new orders.