Malaysia's manufacturing PMI dips in September

PETALING JAYA: The headline Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) – a composite single-figure indicator of manufacturing performance – dipped from 50.4 in August to 49.9 in September, after showing improvement for the first time in four months in August, on reduced new business orders that declined for the fifth successive month.

IHS Markit, which compiles the survey, however, said business conditions were largely unchanged. That said, the PMI average over the third quarter of 2017 as a whole was the highest since Q1’2015.

Firms that recorded a decrease in new orders commented on weak underlying demand. Meanwhile, new export orders declined following an expansion in August.

Manufacturing output rose further at the end of the third quarter. However, the rate of expansion was only fractional and softened from August’s six-month high.

Malaysian manufacturers continued to raise their staffing levels despite the ongoing decline in new work. The rate of employment growth was modest, but the second-fastest since October 2015. Evidently, there were sufficient resources to enable a timely completion of unfinished business, with backlogs decreasing for the fourth consecutive month.

Firms faced sharp cost inflationary pressures due to a general rise in raw material prices. Reflecting higher cost burdens, firms raised their charges again in September. Rates of inflation for both input costs and selling prices quickened to the fastest since May.

Purchasing activity fell at a solid pace in response to lower sales volumes. As a consequence, stocks of purchases also declined. Delivery times shortened for the first time in seven months during September, albeit fractionally. The improvement in vendor performance reflected special requests for faster deliveries, according to survey respondents.

Stocks of finished goods declined for the sixth consecutive month during September, with panellists reporting efforts to streamline inventories.

Firms remained confident towards the 12-month outlook for output. Panellists commented on planned expansions and expected improvements in market demand.

Commenting on the Malaysian Manufacturing PMI survey data, Aashna Dodhia, economist at IHS Markit said: “The underlying indicators that signalled some signs of recovery in the manufacturing sector in August proved to be transitory as operating conditions were broadly unchanged in September. Weak demand contributed to reduced new business and only a fractional expansion in output. Moreover, there was a renewed decline in new export orders.

“On the bright side, employment rose for the third successive month. Over the third quarter of 2017 as a whole, the PMI showed the highest average since Q1’2015. IHS Markit forecasts industrial production growth of 4.6% in 2017.”