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Malaysia PMI October 2020

Malaysia: Manufacturing PMI moves deeper into contractionary terrain in October

The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, dropped to 48.5 in October from 49.0 in September. As a result, the index slid further below the 50-threshold that separates improving from deteriorating conditions in the manufacturing sector.

October’s decline was chiefly driven by moderating growth in new orders and output, largely attributed to the reinstatement of Covid-19 restrictions amid rising infections. Moreover, slower growth of new business enabled firms to significantly reduce backlogs, which also resulted in further staffing reductions. Meanwhile, given elevated uncertainty and a fragile demand environment, firms’ optimism regarding the 12coming months eased from September’s nine-month peak. On the price front, raw material shortages pushed input costs higher, prompting firms to increase their selling prices once again, albeit only slightly.

Commenting on October’s results, Chris Williamson, chief business economist at IHS Markit, noted:

“The rebound from the second quarter’s economic slump is showing signs of losing momentum as we head into the fourth quarter. Rising COVID-19 infection rates and worries regarding further lockdown precautions, both at home and in export markets, are hitting order books and denting business confidence.”

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