Malaysia: Manufacturing PMI slips into negative territory in December
January 2, 2018
Operating conditions in Malaysia’s manufacturing sector deteriorated in December, with the IHS Markit manufacturing Purchasing Managers’ Index (PMI) falling to 49.9 from 52.0 in the previous month. As a result, the PMI now lies below the 50-point threshold that separates expansion from contraction in the manufacturing sector.
December’s result reflected a renewed decline in new orders that was largely driven by weaker domestic demand. Output growth moderated as a result of poor demand dynamics and remained modest overall. Higher volumes of output, however, pushed Malaysian firms to increase their payroll numbers marginally in December. Backlogs of work decreased for a seventh consecutive month, showcasing the lack of capacity pressure in the sector. Regarding prices, high input price pressures persisted in December, only easing slightly from the previous month. As a result, firms moved to increase average selling prices, thus passing part of the increased cost burden to consumers.
On a positive note, Malaysian businesses retained an optimistic outlook for output over the next 12 months, citing projections of an improvement in underlying demand conditions. The level of business sentiment was, however, slightly below November’s near four-year high figure.
Author: Almanas Stanapedis, Economist