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Malaysia PMI March 2020

Malaysia: Covid-19 pandemic supresses manufacturing sector further in March

The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, ticked down to 48.4 in March from 48.5 in February. Consequently, the index fell further below the 50-threshold, signaling a further deterioration in operating conditions over the prior month.

Malaysia’s manufacturing sector continued to be strained by the ongoing coronavirus pandemic, which has zapped demand and constricted operating conditions. New orders fell at the sharpest pace in the survey’s near eight-year history and new export sales were particularly battered. Goods producers cut production again in March, with the output sub index falling to its lowest level since June 2016 amid both demand- and -supply side constraints. Supply-side dynamics worsened in March, with supplier delivery times lengthened further, and were the most severe on record. Delays lead to shortages of numerous raw materials and inputs.

Input cost inflation slowed in March, despite shortages and a notably weaker ringgit. Manufacturers, subsequently, lowered output prices for the third consecutive month in a bid to revive demand.

Finally, confidence in the manufacturing sector struck an over four-year low in March as producers are increasingly worried about the long-run damages caused by the global pandemic and expect further output cuts over the next 12 months.

Commenting on the outlook, Chris Williamson, chief business economist at IHS Markit, noted:

“Supply from China should start to improve in coming weeks, helping lift some of the production constraints, but the next problem will be one of slumping global demand […] Worse therefore looks set to come in the second quarter, both in terms of exports and domestic demand in Malaysia, but as yet there is great uncertainty as to how long the global slump will persist.”

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