Malaysia: Manufacturing conditions continue to worsen in December
January 2, 2019
The manufacturing Purchasing Managers’ Index (PMI), produced by Nikkei and IHS Markit, fell from 48.2 in November to 46.8 in December, the lowest reading since the survey began in July 2012.
The ongoing deterioration in operating conditions in December came on the heels of weakening output levels and demand, both domestic and overseas. Foreign demand weakened only marginally on a drop in new business growth from clients in Europe and Asia-Pacific, while domestic demand fell markedly. This led to firms using their stocks of finished goods to clear outstanding orders, resulting in the strongest depletion since November 2016 and a decrease in backlogs of work. Softening demand also drove manufacturers to scale back purchasing activity for the third month running. Furthermore, job growth stagnated in December in an additional sign that the manufacturing sector is going through a rough patch.
Inflationary pressures remained elevated on pricier raw materials and unfavorable exchange rate movements, however, the pace of inflation eased somewhat. Output prices rose in consequence, but price gains were held back by competition and discounts. Surprisingly, business confidence increased in December to a four-month high.
Commenting on the result, Joe Hayes, Economist at IHS Markit, noted that “Negative readings of the PMI have been recorded across each month of Q4, signaling that the goods-producing sector is likely to heavily weigh on the final GDP print of 2018. […] With production falling, firms cut back stocks of inputs and finished goods, suggesting that prospects for the start of 2019 are likely to remain negative.”
Malaysia Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists see fixed investment rising 3.3% in 2019, which is up 0.1 percentage points from last month’s estimate. For 2020, the panel expects fixed investment to increase 3.7%.
Author: Jan Lammersen, Economist