Malaysia: Manufacturing conditions worsen on drops in output and new orders in November
December 3, 2018
The manufacturing Purchasing Managers’ Index (PMI), produced by Nikkei and IHS Markit, dropped from 49.2 in October to 48.2 in November. The headline figure moved further south of the crucial 50-point mark that separates expansion from contraction in the manufacturing sector and marked the lowest reading since May.
The stronger deterioration in business conditions reflected marked drops in output and new orders. New business fell chiefly on weakening domestic demand as export sales increased, albeit marginally. This led firms to reduce their purchasing activity; however, as companies continued to increase their payrolls, backlogs of works decreased. In terms of prices, input inflation was driven by the depreciation of the ringgit and higher raw material costs. Output costs rose at a marked pace as firms aimed to protect profit margins by passing higher costs on to clients.
Commenting on the result, Joe Hayes, Economist at IHS Markit, noted that “growth prospects for the fourth quarter took a turn for the worse in November. […] Key forward-looking gauges of macroeconomic health also depicted downside risks […]. Following the introduction of the Sales and Services Tax (SST) in September, panellists have mentioned weaker demand pressures in Q4 so far.”
Malaysia Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists see fixed investment rising 3.2% in 2019, which is unchanged from last month’s estimate. For 2020, the panel expects fixed investment to increase 3.8%.
Author: Jan Lammersen, Economist