Manufacturers cautious on 1H outlook, FMM-MIER survey says

File pic: Rela personnel checking the temperatures of market goers at the entry point of Jalan Penaga which was closed to motorists near Jelutong wet Market during MCO 2.0. —ZAINUDIN AHAD/The Star 17 Jan 2021

KUALA LUMPUR: Manufacturers are cautious on their business projections for the first half of this year (1H 2021), due to the constrains on mobility and demand, according to an FMM-MIER Business Conditions Survey.

The survey said on Tuesday the resurgence of the Covid-19 cases in the last quarter of 2020 has continued to pose challenges for both the government and businesses due to these constraints.

“While most of these indicators have improved from the previous period, they are below the optimism threshold. This implies that cautiousness among manufacturers has continued to prevail in their business outlook for the next six months, ” it said.

“The expected index for business activity rose to 87, and with its reading below the optimism threshold, implies that respondents are cautiously hopeful of a pick-up in their businesses soon, ” the findings of the survey showed.

“The survey showed 23% replied positively, while 41% do not foresee any change in the coming months.

“The prognosis for local and export sales for 1H2021 is equally subdued. Registering below the optimism threshold, both the expected indexes for local sales and export sales stood at 74 and 88, respectively, reflecting, once again, cautiousness on the part of the respondents.

“Favourable replies from 14% of those who sell locally and 24% of those who export indicate that export sales are expected to perform better than local sales in 1H2021, ” it said.

The survey also showed the indexes for expected production volume and capacity utilisation are also below the optimism threshold.

At 91 and 92, respectively, these are additional signs that respondents are cautiously projecting a pick-up in these aspects in 1H2021. Also 26% of the respondents are planning to increase their production volume soon.

On the capacity utilisation, 25% are considering increasing their capacities soon.

The survey showed the expected cost of production index rose from the prior survey to 155 currently, an inference that production is likely to cost more in the coming months. This is projected by 62% of the respondents, up from 45% previously. Only 7% are anticipating otherwise.

“Capex and employment are expected to shift higher in 1H2021, as shown by the expected indexes which increased from the preceding survey to 98 and 102 in the current survey, respectively. Also 24% of the respondents are planning to increase their capex soon and 19% have new recruitment plans for 1H2021, ” it said.

This are the findings of the eighteenth edition of the FMM-MIER Business Conditions Survey, a bi-annual collaboration between the Federation of Malaysian Manufacturers (FMM) and the Malaysian Institute of Economic Research (MIER).

The findings also showed after a slow 1H2020 due to the onslaught of the Covid-19 pandemic, activity in the Malaysian manufacturing sector picked up slightly and cautiously, in 2H2020.

Most indicators registered readings below the 100-point threshold level of optimism, an indication that overall business conditions in 2H2020 had remained subdued.

The survey, which drew 652 respondents nationwide, was conducted from Dec 23 to Jan 31,2021 and tracked business confidence via the FMM-MIER Business Conditions Index covering the actual performance in 2H2020 and outlook for 1H2021.

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