1 month ago
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PETALING JAYA: Rising Covid-19 cases and renewed restrictions to prevent the virus’ spread stymied the recovery in the Malaysian manufacturing sector in October, according to the IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI), causing the reading to decline for the fourth consecutive month to 48.5 from 49.0 recorded in September.
IHS Markit explained that the latest reading signalled a modest deterioration in the health of the sector, albeit at a much less marked pace than that seen at the height of the pandemic.
Although the historical relationship between the index and official data suggests a continued rise in gross domestic product at the start of fourth-quarter 2020, manufacturing output looks to be stagnating due to a resurgence in the pandemic.
IHS Markit elaborated that the extension and the reintroduction of restrictions to prevent the spread of Covid-19 were reportedly key factors behind worsening market demand and scaling back of production.
New export orders fell, and to a greater extent than total new business, amid ongoing disruption to international demand caused by the pandemic.
On the latest survey results, IHS Markit chief business economist Chris Williamson commented that the rebound from the second quarter’s economic slump is showing signs of losing momentum as it heads into the fourth quarter.
“Rising Covid-19 infection rates and worries regarding further lockdown precautions, both at home and in export markets, are hitting order books and denting business confidence,” he said.
Williamson said optimism about the year ahead fell sharply in October, and the decline in export sales gathered pace to result in a weakened order book situation.
“Inflationary pressures remain benign, despite supply shortages persisting, with companies pricing aggressively to win sales. Cost control remained in focus, though it was encouraging to see job losses moderate again during October,” he added.
The survey found that weaker new order inflows resulted in a depletion of work backlogs, resulting in the sharpest reduction of outstanding business since December 2018.
A lack of pressure on capacity resulted in a further fall in employment, although the rate of job cuts continued to soften from August’s survey record.
Similarly, companies expressed a reluctance to raise purchasing and hold inventories amid the fragile demand environment and stocks of both purchases and finished goods were consequently depleted in October.
Falling input demand notwithstanding, manufacturers continue to report supply chain delays as suppliers’ delivery times lengthened again at the start of the fourth quarter amid Covid-19 restrictions domestically and abroad.
IHS Markit noted that shortages of materials contributed to an increase in input costs, although the pace of inflation ticked down and was weaker than the series average.
At the same time, output price inflation softened, as it was only marginal given that the efforts to pass on higher input costs to customers were undermined by the offering of discounts to try to secure new orders.
It reported that although manufacturers remained confident that output will increase over the coming year, optimism fell sharply from September’s nine-month high amid rising pandemic cases and the extension of restrictions.
Those surveyed that predicted an increase in output are hoping market demand will recover over the next 12 months.
English (United States)