PMI rises to 50.5 in January

PETALING JAYA: The headline Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) rose from 49.9 in December to 50.5 in January, in line with a marginal improvement in operating conditions across Malaysia’s manufacturing sector.
The Nikkei Malaysia Manufacturing PMI, a composite single-figure indicator of manufacturing performance highlighted that the sector had strengthened in two of the past three months and improvement was recorded despite a broad stagnation in output, following increases in each of the previous five months.
Following a broad stagnation in December, manufacturing conditions improved at the start of 2018, albeit only marginally. The overall upturn was mainly driven by a renewed rise in new business.
Reflecting greater inflows of new work, Malaysian manufacturers raised their payroll numbers for the third month in succession during January. That said, the rate of job creation was marginal.
Commenting on the Malaysian Manufacturing PMI survey data, Aashna Dodhia, economist at IHS Markit, which compiles the survey, said the recent steady run of output growth lost some steam in January, but the manufacturing PMI data signalled a return to expansion of new orders.
“This, alongside rising employment and buoyant sentiment, suggests that output could regain momentum as the year progresses,” Dodhia said.
Meanwhile, IHS Markit said firms reduced their pre-production inventories in January, but at a marginal pace.
"Stocks of finished goods also fell, the first time in three months in which this has been the case," it added.
On the price front, firms faced higher input costs. According to anecdotal evidence, higher raw material prices emanated from currency weakness. Despite easing for the second month running, input cost inflation remained sharp overall.
Concurrently, firms raised their average selling prices for the fifteenth consecutive month. Panellists reportedly raised their factory gate charges to pass on higher input costs to customers. Amid reports of difficulties in obtaining raw materials, average lead times increased during January.
According to the data, the level of positive sentiment towards the 12-month outlook for output was the joint-strongest since December 2013.
Expectations of an improvement in demand conditions and company expansion plans were the key factors behind business confidence, according to anecdotal evidence, IHS Markit added.