Manufacturing sector sees improvements in operating conditions with renewed expansions in both production levels and new orders
by LYDIA NATHAN / pic by MUHD AMIN NAHARUL
MALAYSIA’S Purchasing Managers’ Index (PMI) rose from 49.9 in March 2021 to 53.9 in April 2021, recording the highest expansion since July 2012 indicating a solid improvement for the manufacturing sector.
According to IHS Markit Ltd, the local manufacturing sector saw improvements in operating conditions in April, where businesses renewed expansions in both production levels and new orders, with the latter growing at the fastest pace since April 2014, as firms adjusted to operating under Covid-19 restrictions and demand conditions continued to strengthen.
Data for April 2021 suggested output grew for the first time in nine months, attributed to the renewed growth on improved market demand leading to increased orders.
IHS Markit chief business economist Chris Williamson said lockdowns have eased and helped drive a welcome surge of growth for Malaysian manufacturing, while vaccine rollouts have propelled business optimism for the year ahead.
“New order volumes also returned to expansion territory in April, the first rise since September 2018. The pace of the increase was solid and the quickest in exactly seven years, as manufacturers noted stronger client confidence notably for new products. Furthermore, new export sales increased for the first time since November 2019, as demand in key markets across Asia and the US recovered,” he said.
Williamson added that at the same time, there was a fall in employment for manufacturing firms in April, where staffing levels fell in 12 of the last 13 months, with manufacturers noting a lack of foreign work permits being issued.
“Supply-side constraints have developed further, however, acting as a damper on growth and could restrict the recovery. Backlogs of work are accumulating at a rate not seen for four years as firms struggle to produce enough goods to meet demand.”
“Not only are firms reporting difficulties in finding sufficient numbers of suitable staff to raise production but delivery delays of inputs are also worsening,” he said.
Meanwhile, input cost increased for the 11th consecutive month in April, reflecting higher prices of raw materials and logistics.
Williamson said the rate of input price inflation accelerated to the fastest in just over four years and was rapid overall.
“Prices are rising as a result of the imbalance of demand and supply, with prices charged by producers increasing at one of the sharpest rates in four years. The concern is that these price hikes will inevitably hit consumers in coming months,” he said.
Moving forward, local manufacturers are increasingly optimistic for the year ahead regarding outlook for output, where expectations reached the highest level since August 2019, underpinned by hopes that a successful vaccination programme would induce a broader economic recovery.