Malaysia: Manufacturers continue to face tougher operating conditions in August
September 3, 2019
The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, ticked down to 47.4 in August from 47.6 in July. The headline reading thus remained below the neutral 50-threshold that separates contraction from expansion in the manufacturing sector.
The weaker reading in August came on the back of continued weakness in new orders, which was in part due to stagnating export sales and respondents pointed to intense competitive pressures and global trade war woes as key factors. This fed through to a dip in output in the month. On a brighter note, business confidence rose to the highest level in almost six years, and anecdotal evidence suggests planned sales promotions, new product launches, and forecasts of improved demand lifted manufacturers’ spirits. This positive view on the outlook prompted businesses to spur job growth in August, after trimming jobs in July. Higher staff levels allowed companies to reduce backlogs of work for the twelfth month running.
On the price front, input price inflation accelerated due to currency fluctuations, higher commodity prices, and raw material shortages. In response, businesses raised output prices at the fastest rate in nine months.
Commenting on the outlook, Chris Williamson, chief business economist at IHS Markit, noted:
“The survey’s latest data suggest some mild loss of momentum in the third quarter as current manufacturing conditions clearly remained challenging in August. […] Encouragingly, Malaysia’s manufacturers have become increasingly optimistic that the tide will soon turn and that demand will strengthen again in coming months.”
Author: Lindsey Ice, Economist