Malaysia: Manufacturing sector activity moderates in February
March 1, 2018
Manufacturing conditions deteriorated marginally in February on the back of lower demand, following a feeble improvement in January. The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, dipped slightly to 49.9 in February from 50.5 in January. As a result, the PMI now lies a tad below the 50-point threshold that separates expansion from contraction in business activity in the manufacturing sector.
The marginal worsening of operating conditions reflected a reduction in new orders, with survey respondents noting feeble underlying demand. New export orders also declined following three months of growth, with firms noting weaker demand from Europe and the United States. In line with a decrease in order logs, output growth moderated in February. Employment growth also decelerated to its weakest in four months. Meanwhile, purchasing activity fell for a third consecutive month, underpinned by lower restocking needs amid dwindling demand.
Regarding prices, firms faced steeper input inflation on the back of a weaker ringgit relative to the U.S. dollar. They were only able to partially roll these costs over to consumers. Nonetheless, manufacturers were optimistic regarding output in the next twelve months, with firms expecting an improvement in demand in the period. Business sentiment was, however, slightly weaker than in January and below the series’ historical average.
Author: David Ampudia, Economist