Malaysia: Manufacturing conditions continue to worsen in February
March 1, 2019
Business conditions in Malaysia’s manufacturing sector worsened at a stronger pace in February than in January, with the manufacturing Purchasing Managers’ Index (PMI) dropping from 47.9 in January to 47.6. The index, produced by Nikkei and IHS Markit, consequently remained firmly entrenched in contractionary territory.
February’s downturn came on the coattails of drops in output, new orders and stagnating job creation. New orders fell owing to the wider economic slowdown affecting demand dynamics. A decrease in demand from Asian markets was cited as the primary driver behind the drop in new export orders. Due to falling output and new orders, firms reduced their purchasing activities and inventories, with backlogs of work falling for the sixth month running and stock of purchases declining at a marked pace. Stocks of finished goods were also reduced.
Inflationary pressures eased somewhat in the month as input prices dropped fractionally, providing firms room to leave output prices unchanged. Furthermore, although business sentiment remained optimistic on expectations of a pick-up in demand and new products in the pipeline, confidence eased to a three-month low.
Commenting on the result, Joe Hayes, economist at IHS, noted that “near-term manufacturing prospects appear downbeat, as firms opted to leave workforce numbers unchanged, scaled back input buying sharply and reduced inventories, suggesting that firms are bracing themselves for continued production cutbacks.”
Malaysia Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists see fixed investment rising 3.0% in 2019, which is unchanged from last month’s estimate. For 2020, the panel expects fixed investment to increase 3.6%.
Author: Jan Lammersen, Economist