KUALA LUMPUR (March 1): The Malaysian manufacturing sector lost further momentum during February.
According to IHS Markit, businesses continued to scale back production, while incoming orders also moderated.
It said restrictions to reduce the spread of coronavirus disease 2019 (Covid-19) cases both domestically and internationally led to reduced demand for Malaysian manufactured goods.
Despite this, manufacturers were increasingly optimistic regarding the year-ahead outlook, with hopes that the pandemic would subside and trigger a broad recovery in demand and production.
The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) — a composite single-figure indicator of manufacturing performance — dipped from 48.9 in January to 47.7 in February.
This reading indicated a further moderation in the health of the manufacturing sector, although the deterioration was considerably less marked than that seen during the first wave of the pandemic in April 2020.
IHS Markit said looking at the historical relationship between official statistics and the PMI, the latest reading is representative of modest growth in industrial production and gross domestic product (GDP), yet the survey highlights that the pandemic continues to take a toll on the economy.
It said both production and new order volumes weakened in February.
Though quicker than January, the rates of deterioration remained markedly softer than the peak rates of decline seen last April.
IHS Markit said firms commonly attributed the ongoing weakness to continued virus-fighting measures, which dampened demand in domestic and external markets.
It said foreign demand for Malaysian manufactured goods was subdued as firms highlighted strict measures to curb Covid-19 infections in key international markets.
That said, the pace of reduction in export sales fell at a softer pace than total new orders.
At the same time, the rate of job shedding at Malaysian manufacturing firms edged towards stabilisation in the latest survey period.
Employment levels fell only marginally in February and at a pace that was softer than the previous month.
Firms took the opportunity to reduce volumes of outstanding business while spare capacity was available, as manufacturers noted a renewed slowdown in the level of backlogs in February following a stabilisation in January.
IHS Markit said looking forward, firms operating in the Malaysian manufacturing sector were increasingly optimistic regarding the 12-month outlook for production.
Positive sentiment strengthened to the highest for five months amid hopes that the end of the pandemic would result in stable operating conditions and boost production and sales.
IHS Markit chief business economist Chris Williamson said February was another tough month for manufacturers, with the pandemic continuing to adversely affect order books and disrupt supply lines and shipping.
He said business conditions consequently deteriorated at a rate not seen since last May, adding to the picture of a disappointing first quarter.
“However, with global demand showing signs of reviving, production growth should start to pick up again in the second quarter, and it was encouraging to see business optimism about the year ahead improve after its weak start to the year.
“Businesses are increasingly anticipating a resurgence in demand as the impact of the pandemic eases as the year proceeds,” he said.