Malaysia: Manufacturing PMI declines in May but remains in expansionary territory
June 1, 2021
The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, dropped to 51.3 in May, following April’s 53.9, which had logged the best reading on record. That said, the index remained above the 50-threshold that separates improving from deteriorating conditions in the manufacturing sector, compared to the previous month.
May’s result was largely owing to a solid expansion new business, amid healthy domestic demand. However, the pace of expansion was softer than in April, weighed on by the introduction of tighter restrictive measures to combat soaring numbers of Covid-19 cases. Moreover, production also felt the brunt of the restrictions, with firms scaling back their output volumes. This, also prompted businesses to reduce their staffing levels for the second successive month, but only marginally. However, despite deteriorating sentiment, manufacturers remained positive over output in the 12 coming months, amid hopes of a swift end to the pandemic.
On the price front, supply chain bottlenecks, particularly in light of the reinstatement of tighter restrictions in key trading partners, led to a spike in raw material prices, resulting in higher input cost inflation overall. In a response, manufacturers tried to pass their costs to clients, but only partially.
Chris Williamson, chief business economist at IHS Markit, noted:
“Despite the easing of growth in May, the PMI continues to suggest that the second quarter will see the strongest manufacturing upturn since the survey began in 2012, but the concern is that the virus could continue to weaken growth in coming months. Future growth expectations took a knock in May, as the renewed wave of infections served as a reminder that the virus remains a significant risk to the outlook.”
Author: Alexandros Petropoulos,