PETALING JAYA: Manufacturers remain cautious over their business prospects for the first half of 2021, as Covid-19 resurgence in the final quarter of 2020 poses challenges, according to the latest FMM-MIER business conditions survey.
“With constraints on mobility and demand going forward, respondents are cautious on their business projections for the first half of 2021, as reflected in the latest forward-looking indicators of the survey.
“While most of these indicators have improved from the previous period, their persistent stay below the optimism threshold is an implication that cautiousness among manufacturers has continued to prevail in their business outlook for the next six months, ” the survey said.The FMM-MIER Business Conditions Index is based upon a baseline score of 100 points.
The survey, which drew 652 respondents nationwide, was conducted from Dec 23,2020 to Jan 31,2021 and tracked business confidence covering the actual performance in the second half of 2020 and outlook for the first half of 2021.According to the survey, the expected index for business activity rose to 87. With its reading below the optimism threshold, it implies that respondents are cautiously hopeful of a pick-up in their businesses soon.
The survey said 23% replied positively, while most (41%) do not foresee any change in their businesses in the coming months.
“The prognosis for local and export sales in the next six months 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 the first half of 2021.”
It also showed that indexes for expected production volume and capacity utilisation are 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 the first half of 2021.”
It said 26% of the respondents are planning to increase their production volume soon, up from 24% in the previous survey.
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. Capital expenditure and employment are expected to shift higher in the first half of 2021, as shown by the expected indexes for capital investment and employment, which increased from the preceding survey to 98 and 102 in the current survey, respectively.”
Going into 2021, the survey said employment in the manufacturing sector is expected to remain stable, with 54% and 26% of the respondents likely to retain their existing workforce and hire more workers in 2021, respectively.
“Only 2% are contemplating retrenchment. A breakdown of those planning to increase their workforce in 2021 shows that most are estimating an increase of up to 10%, while most of those planning to retrench are considering downsizing 20% of their staff.”
Separately, AmBank Research said despite the weak manufacturing Purchasing Managers’ Index (PMI) in February, optimism remained on the back of the nationwide vaccine rollout.
“The deployment of vaccines, improving global trade and gross domestic product, stimulus measures and renewed confidence will bode well for manufacturing activities. The domestic economy is projected to grow around 5.2% to 5.9%, ” it said.
The headline IHS Markit Malaysia Manufacturing PMI, a composite single-figure indicator of manufacturing performance, dipped to 47.7 in February from 48.9 in January.