Malaysia: Manufacturing sector improves in January, albeit marginally
February 2, 2018
After stagnating in December, operating conditions in Malaysia’s manufacturing sector improved in January, albeit marginally. The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, rose slightly from 49.9 in December to 50.5 in January. As a result, the PMI now lies slightly above the 50-point threshold that separates expansion from contraction in business activity in the manufacturing sector.
January’s result reflected a renewed rise in new orders that was largely driven by improved domestic demand. However, growth in output was minimal. As a result of growth in new business orders, Malaysian firms continued increasing their payroll numbers at a broadly unchanged rate from December. They slightly reduced the pace of input purchases, as they remained cautious amid lagging demand. Backlogs of work decreased for an eighth consecutive month, showcasing the lack of capacity pressure in the sector. High input costs persisted in the month, largely due to currency weakness. As a result, businesses moved to increase average selling prices, passing part of the increased cost burden to consumers.
Malaysian firms retained, however, an optimistic outlook for output over the next 12 months, reflecting their plans for expansion and favorable views on demand conditions. The level of business confidence was the joint-highest since December 2013.
Author: Javier Colato, Economist