Malaysia: Manufacturing PMI deteriorates in June
July 1, 2019
The manufacturing Purchasing Managers’ Index (PMI), which is produced by IHS Markit and Nikkei, dropped to 47.8 in June from 48.8 in May. The headline reading thus fell further below the neutral 50-point mark indicating tougher operating conditions. Nevertheless, the average PMI for Q2 improved relative to Q1, which likely helped to boost the headline GDP figure in the second quarter.
June’s weak reading was mainly driven by soft demand, particularly from abroad. That said, business confidence towards future operating prospects reached the highest level since October 2013. Employment levels were steady in June, while backlogs of work continued to fall. On the price front, input cost inflation eased, while output prices were broadly stable.
Commenting on June’s print, Chris Williamson, chief business economist at IHS Markit, noted:
“even with the current soft patch, the PMI is indicative of manufacturing helping drive a rebound in the annual pace of economic growth from the slowdown to 4.5% seen in the first quarter”.
Going forward, the Central Bank’s decision to cut rates in May and still-tepid inflationary pressures should support operating conditions, while the future of trade talks between the U.S. and China will be a key factor influencing business sentiment.
Author: Steven Burke, Economist