Malaysia’s PMI up on improved overseas demand for M'sian products

Malaysia's economy has been slowing, but real GDP growth on average is still stronger than the 'A' median.

PETALING JAYA: A marginal improvement in Malaysia’s manufacturing operating conditions was recorded for the first time in two years during April, as seen in the Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI).

This was supported by a solid gain in new export orders, as foreign demand for Malaysian-produced goods strengthened and helped offset ongoing weakness from domestic-based clients.

In addition, input prices continued to rise over the month due to adverse exchange rate factors, helping to drive another sharp increase in output charges.

Commenting on the Nikkei Malaysia Manufacturing PMI survey data, Paul Smith, senior economist at IHS Markit, which compiles the survey, said: “April’s survey marked a somewhat positive turnaround for the Malaysian manufacturing economy, with output and new orders rising concurrently for the first time in over two years.”

He said growth was being underpinned by strengthened sales from abroad, which has helped to offset ongoing domestic demand weakness.

“With export growth also possibly supported by relative currency weakness, the corollary was a further sharp rise in input costs, with firms seeking to pass these on wherever possible to clients.”

The Nikkei Malaysia Manufacturing PMI, which is a composite single-figure indicator of manufacturing performance, rose to 50.7 in April.

The index compared favourably to March’s index of 49.5, indicating a net improvement in the health of the manufacturing sector since March 2015.

In addition, output volumes rose for a third successive month during April.

The increased production was attributed to a combination of new project start-ups as well as higher demand and new orders.

Though marginal, April’s PMI survey snapped a 25-month run of falling new business, amid reports of strengthened demand from abroad.

The April survey showed that new export orders rose at a solid pace, with China, Europe, Japan and the Middle East as notable sources of new sales success.

Apart from that, the survey showed little change in employment numbers, as compared to the previous month.

However, a number of firms commented on difficulties and delays in the recruitment of foreign workers.

There were also reports that adverse currency movements had raised the price of raw materials.

Average input prices subsequently rose sharply during April, with the rate of inflation remaining historically high.

The report said Malaysian manufacturers sought to pass on their increased costs to clients through a rise in average output charges.

The PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 manufacturing companies.

An index reading above 50 indicates an overall increase in that variable, while below 50 indicates an overall decrease.