KUALA LUMPUR: The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index, a composite single-figure indicator of manufacturing performance, slipped to 48.9 in January from 49.1 in December.
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The latest reading signalled a marginal deterioration in the health of the manufacturing sector, although one that was significantly softer than seen at the height of the pandemic, IHS Markit said.
IHS Markit, however, said manufacturers remained confident that output would increase over the coming 12 months, despite new lockdowns around the world and supply delays.
The historical relationship between the PMI and official statistics suggested that gross domestic product (GDP) was trending towards broad stabilisation, though manufacturing output stagnated as the renewed rise in Covid-19 cases resulted in the introduction of tighter restrictions in both domestic and key international markets.
The American-British information provider said businesses signalled the recovery in the Malaysian manufacturing sector was hindered at the start of 2021 by rising infection case numbers and stricter restrictions to try and curb the further spread of the virus.
It said both output and new orders were scaled back in January as the pandemic undermined demand, while export sales also lost further momentum as some external markets also battled a resurgence in infections.
IHS Markit said international restrictions introduced to slow the spread of Covid-19 presented significant disruptions to supply chains, as manufacturers reported difficulties sourcing and receiving inputs.
IHS Markit chief business economist Chris Williamson said renewed efforts to contain the Covid-19 pandemic both at home and around the world had not surprisingly taken a further toll on the manufacturing sector.
“Not only is demand coming under further pressure, notably in consumer-facing markets, but supply chains are being disrupted by the restrictions caused by the pandemic.
“Global demand is exceeding supply for many key inputs as suppliers struggle to boost capacity, with delays exacerbated by a lack of global shipping capacity,” he said in a statement today.
He was hopeful that a swift recovery also took a step back in January, linked in part to concerns over new variants of the coronavirus, pushing business optimism back to its lowest since last August.
“More encouragingly, optimists continue to exceed pessimists, and the global vaccine roll-out continues to provide a powerful boost to prospects for many companies,” he added.
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IHS Markit said both production levels and new orders were scaled back in January, although to lesser extents than seen in December.
Manufacturers commonly reported that the pandemic had dampened demand and confidence, while new restrictions had caused output and sales to be scaled back. Supply constrains also limited production and shipments.
New export orders saw a further moderation in January, and to a greater extent than total new business as disruption in international markets strengthened as infections rose.
Malaysian manufacturers recorded a stabilisation in backlogs of work in the latest survey period following 28 months of depletion, indicating that pressure was building on existing capacity.
However, anecdotal evidence suggested additional pressure was due to a lack of manpower to fulfil orders due to the pandemic.
In fact, firms signalled that employment levels dipped slightly in January, following a near-stabilisation in December.
Goods producers continued to report significant supply chain delays during January.
“Supplier delivery times lengthened sharply as restrictions to combat Covid-19 both in Malaysia and abroad were tightened. A global shortage of containers was also seen to have exacerbated shipping delays,” IHS Markit said.
Firms had also indicated a reluctance to raise and hold inventories due to depressed demand conditions. Therefore, stocks of both pre- and post-production inventories were depleted further during January.
“Difficulties in sourcing and receiving items contributed to a sharp increase in input costs, with the pace of inflation the quickest since May 2017.
“As firms partially passed rising costs on to clients, output prices rose further in January, increasing at the fastest pace since April 2018.”- NST