by LYDIA NATHAN/ pic by MUHD AMIN NAHARUL
MALAYSIA’s industrial production has recorded a 5% decline in October 2020, compared to 1% increase the month before.
The three-month streak of growth was cut short due to the combination of low oil prices and weak demand after lockdowns in Europe and the US made an impact on the production and exports for Malaysia.
According to Moody’s Analytics Economic View report, heightened Covid-19 restrictions in major trade partners disrupted supply chains of imported materials and dampened external demand for local exports.
“Production and the volume for new orders decreased in November 2020 while costs continued to rise due to the increases in raw material prices,” the report said.
It added that manufacturing and electricity rose in yearly terms but the slump in mining weighed down the overall index for the country.
“Manufacturing held up well, growing 2.4% year-on-year, following 4.3% gain in September 2020. Surges in the core electronics and transport equipment has also increased on a yearly basis despite travel restrictions,” it said.
Electrical products recorded an increase of 8.1%, slightly lower than the 9.8% increase recorded in September 2020.
“Food, beverages and tobacco fell 3.4% year-on-year in October 2020, after increasing 4.9% the month before. Petroleum, chemicals, rubber and plastic rose 1.7% following a 3.2% gain previously” Moody’s Analytics added. said.
The report stated the IHS Purchasing Managing Index (IHS PMI) dropped for the fifth consecutive month in November 2020 to 48.4 from 48.5 in October.
“A reading of less than 50 indicates a contraction of the manufacturing sector. The second wave of Covid-19 cases in the country resulted in a partial lockdown in various places, including the Klang Valley which is the economic center of the country.”
“Although restrictions were less severe than the previous lockdowns, the additional hit to consumer and investment sentiment will compound the effects,” Moody’s Analytics further said.
It added the recovery for China’s production will most likely help mitigate the decline for Malaysia’s industrial production in the near future.
“In addition, Malaysia has managed to pass its 2021 Budget through to Parliament, which will be able to guarantee further fiscal support into next year,” it said.