IHS Markit: Malaysia's PMI edges up to 48.1 in September

KUALA LUMPUR: The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) rose to 48.1 in September from 43.4 in August.

IHS Markit, in a statement Friday, said while the latest reading remained below the neutral 50.0 level to signal a further loss of momentum in the sector, the rate of deterioration eased significantly compared to the prior three months.

A reading above 50 indicates an overall increase compared to the previous month, and below 50 an overall decrease.

IHS Markit chief business economist Chris Williamson said the uplift in the PMI for September provided a clear signal that the recent easing of pandemic-related restrictions,both domestically and in many key export markets, was helping drive an improvement in the economy.

According to IHS Markit’s COVID-19 Containment Index, virus-fighting restrictions have been rolled back in Malaysia to their lowest since April, facilitating production and helping ease the downturn in demand.

“Vaccination progress has improved and virus cases were on a downward trend through September, helping drive renewed optimism about the economic outlook and driving business confidence to the highest since April,” he said.

“The survey data therefore add to signs that the economy has turned a corner at the end of the third quarter following a steep downturn, and the improvements in the survey’s future expectations and order book indicators point to growth picking up in coming months.

“Problems persist, however, most notably in terms of pandemic-related supply chain delays, which are pushing up prices and constraining output in some firms. Thus, while manufacturing looks to be on the road to recovery, that path will by no means be without its challenges,” Williamson said.

IHS Markit said the historical relationship between the PMI and official statistics suggested that the recent downturn in GDP would have eased markedly at the end of the third quarter, and the rise in the latest PMI bodes well for improving momentum in coming months.

It noted that both output volumes and new order inflows continued to be scaled back in September, though rates of decline both eased to the softest in four months.

Foreign demand for Malaysian manufactured goods also moderated, but at a softer pace than total new orders as some panellists reported particular pockets of demand in the Middle East and US. The reduction in new export orders was only mild, and eased to the softest since May.

Malaysian manufacturers reported that employment fell slightly for the second month in a row in September as businesses indicated difficulties in taking on foreign workers amid strict border restrictions.

IHS said goods producers continued to report significant supply chain delays during September. Supplier delivery times lengthened at a robust rate once again as containment measures restricted supply of freight capacity and raw materials, exacerbating existing delays and shortages.

In addition, it noted that the difficulties in sourcing and receiving raw materials contributed to a sustained rise in raw material prices.

“As a result, input costs rose for the sixteenth time in as many months in September. Factory gate prices also increased in September, as firms partially passed higher costs on to clients. Both input prices and output charges rose at the quickest rates since May,” IHS siad.

Despite restrictions on the economy and ongoing supply disruption, manufacturers were increasingly confident that output would rise over the coming year, citing hopes that the end of the pandemic would encourage new projects to begin and aid a broad-based recovery in market demand.

“As a result, the degree of optimism reached the highest since April,” it said.

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