PETALING JAYA: Malaysia’s manufacturing sector is optimistic as business confidence about the outlook strengthened to its highest since October 2013 despite manufacturing’s Purchasing Managers’ Index (PMI) continued to fall in June.
According to June survey data, the manufacturing sector faced further challenges, with demand conditions softening, while fewer new orders from international clients also weighed on production volumes. However, companies anticipate that current difficulties will be short-lived.
With the survey finding a greater number of respondents anticipating higher output over the next 12 months, economic growth is expected to accelerate further.
The headline IHS Markit Malaysia Manufacturing PMI registered 47.8 in June, down from 48.8 in May. Overall, the PMI is broadly indicative of annual GDP growth of approximately 4%, according to historical comparisons.
IHS Markit chief business economist Chris Williamson said operating conditions remained challenging for Malaysia’s manufacturers in June, once again reflecting tough trading in export markets.
Williamson pointed out that the PMI is an indicative of manufacturing’s contribution to drive a rebound in the annual pace of economic growth from the slowdown to 4.5% seen in the first quarter, although it is likely to remain below 5% in the next quarter.
Encouragingly, he said manufacturers continued to see signs that the business outlook is brightening.
“Business optimism about the future continued to be dogged by worries about the impact of the US-China trade war on the global economy, but has nevertheless risen to its highest since late-2013. Increasing numbers of firms stepped up their marketing and sales efforts and reported new projects, products and investments amid signs that underlying sales growth has improved.”
Although the June survey results mark the second month the PMI fell in succession, the average for the second quarter as a whole was above that seen in the opening quarter of 2019.
“Analysis of comparable historical official data on Malaysian manufacturing output suggests that, at current levels, the survey’s output index signals annual production growth of just over 3%.”
The latest survey also indicated that Malaysian manufacturers adopted a balanced approach to hiring, with employment levels remaining broadly unchanged since May.
