Malaysian manufacturing PMI falls to lowest in 6.5 years

KUALA LUMPUR: Malaysia's manufacturing sector in December saw the sharpest deterioration in at least six-and-a-half years, a Nikkei survey showed.

The Nikkei Malaysia Manufacturing Purchasing Managers Index, a measure of business conditions in the country's manufacturing sector, hit 46.8 in December, down from 48.2 in November, the lowest level since the survey started in July 2012. 

Readings above 50 indicate an expansion while those below 50 indicate a contraction.

"December data revealed the strongest contraction in the Malaysian manufacturing sector that has ever been recorded in the survey’s six-and-a-half-year history. 

"Negative readings of the PMI have been recorded across each month of Q4, signalling that the goods-producing sector is likely to heavily weigh on the final GDP print of 2018," said Joe Hayes, economist at IHS Markit, which compiles the survey.

A sharp contraction in sales helped to pull the headline index further into negative territory.

According to the survey, panellists indicated that the fall in sales reflected a general slowdown across the marketplace. 

"Malaysian manufacturers also received unfavourable intakes of new work from overseas in December. 

"Orders from clients in European and the Asia-Pacific region were reportedly down on the month. That said, the fall in foreign demand was only mild."

Post-production inventories were depleted to the lowerst level since November 2016 while backlogs of work were reduced to a near one-and-a-half-year peak.

Buying activity fell for a third straight month as goods producers scaled back their input purchasing. 

The manufacturing sector was also hit by a stagnation in employment after six straight months of job creation, with resignations contributing to a loss of growth momentum.

Meanwhile, operating expenses continued to rise due to unfavourable exchange rates and higher raw material costs. However, the rate of inflation eased to a four-month low.