by AZALEA AZUAR / pic by TMR FILE

MALAYSIA’S manufacturing sector has reached its lowest in January since October 2021.

According to a report by MIDF Amanah Investment Bank Bhd, the IHS Markit Malaysia Manufacturing Purchasing Managers’ Index has dropped to 50.5 in January 22 compared to 52.8 in Dec 21, falling lower than its October 21 reading.

“The deterioration in the factory activities was attributable to the prolonged supply constraints, as well as the elevated production prices.

“Both output and new orders declined during the month while exports rose marginally,” it said.

On the other hand, the employment rate rose as companies hired more workers to boost production.

Inflation also continues to increase since there are more shortages of raw materials.

The bank expects businesses to remain optimistic since the impact would be lesser compared to the start of the Covid-19 pandemic despite growing concerns of the Omicron variant.

They also are confident that momentum would pick up in the coming 12 months.

“Moving forward, we anticipate the further recovery in the domestic spending activities coupled with the growing external demand will foster Malaysia’s manufacturing activities in the coming months.

“In addition, we opine the production costs to ease going forward given the improvements in the global supply chain bottlenecks as indicated by Baltic Dry Index and Global Supply Chain Pressure Index,” said MIDF.

It warns that these new variants may pose a threat to the outlook of Malaysia’s trade-oriented manufacturers and export.

Previously, IHS Markit chief business economist Chris Williamson said Malaysia’s manufacturers reported a new downturn in January as the Omicron variant created further headwinds for manufacturers around the world, dampening demand and exacerbating existing, unprecedented supply chain delays.

“In Malaysia, manufacturers have in fact grown increasingly optimistic that the longer-term outlook has brightened, with business expectations for the year ahead rising to the highest since April and almost at the highest seen since the pandemic began,” Williamson said in a statement last Thursday.

IHS Markit said manufacturers commonly reported that raw material shortages and rising prices had dampened client demand and production capacity.

Meanwhile, foreign demand for Malaysian manufactured goods also moderated, but at a softer pace than total new orders as some panellists reported particular pockets of demand in the US. The reduction in new export orders was only mild, though it was the eighth in nine months.