KUALA LUMPUR: The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) – a composite single-figure indicator of manufacturing performance – rose to 49.9 in March from 47.7 in February.
In a statement, IHS Markit said the latest reading pointed to a stabilisation in operating conditions, with the headline Index reaching its highest since July 2020.
Looking at the historical relationship between the PMI and official statistics, the latest reading is representative of annual growth in both industrial production and GDP, although the survey indicates that the manufacturing sector is only gradually recovering from the impact of the pandemic, it said.
Chief business economist Chris Williamson said the Malaysian manufacturing sector took further welcome steps on the road to recovery in March, with rates of order book and export decline easing.
“While current production remains subdued, firms are gearing up for better times ahead, especially in relation to hiring. March saw jobs being created at the fastest rate for two years as business grew more optimistic about the outlook,” he said.
“The supply of inputs continued to deteriorate, adding to manufacturers’ headwinds, but rising global trade should help alleviate some of the shortages in coming months, driving further expansion of Malaysian production and taking some of the heat out of prices,” Williamson said.
IHS Markit said Malaysian goods producers signalled the first expansion in employment levels in 12 months in the latest survey period.
It said preparation for orders in the future reportedly required additional capacity, and pushed the seasonally adjusted employment index to the highest since April 2019.
Input costs meanwhile increased for the tenth consecutive month in March, reflecting higher prices for a broad variety of raw materials and higher freight costs. The overall rate of input cost inflation accelerated to the fastest in nearly four years.
IHS Markit noted that manufacturers sought to partially pass these higher costs on to clients in the form of higher output charges, which rose at the quickest pace since March 2017.
In addition, it said shortages of materials, as well as delays in receiving shipments, caused average supplier lead times to lengthen to the greatest extent since May 2020.
“Despite headwinds from supply shortages and ongoing Covid-19 related issues, Malaysian manufacturers displayed a stronger degree of optimism regarding the outlook for output in the coming year. Firms recorded the highest level of positive sentiment for six months in March.
“Panel members attributed the improved outlook to hopes that a recovery in both domestic and external demand would boost production levels and sales over the next 12 months,” IHS Markit said.