May output shrinks again to 48.7
KUALA LUMPUR: The manufacturing sector output has contracted again last month after a marginal improvement in April.
The headline Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) — a composite single-figure indicator of manufacturing performance — dipped below the 50.0 mark to 48.7 last month.
Lower new export business was a factor and there were lower new orders in Singapore, Thailand and Indonesia.
Purchasing activity showed an identical trend to new orders last month.
Both pre- and post-production inventories were depleted, with firms highlighting efforts to streamline stocks amid subdued client demand.
However, goods producers maintained positive expectations towards output in 12 months’ time, although the optimism was relatively subdued.
Commenting on the Malaysian manufacturing PMI survey data, IHS Markit senior economist Paul Smith said the latest data dashed hopes of a sustained local manufacturing upturn, with the headline PMI returning to contraction territory.
“Simultaneous growth of production and new work in April had raised the prospect of an economic turnaround, but both returned to decline in May,” he said.
Panellists reported weak demand both domestically and abroad, citing disappointing sales in nearby Asian economies.
Standard Chartered Bank (StanChart) economist Edward Lee said it could be due to the deleveraging and slowing of growth in China.
“The region started this year strongly from the strong momentum late last year. It was mostly due to price base effect and the huge pick-up in terms of value performance and also positive momentum from inventory restocking in China.”
Lee expects to see a moderation in growth in the months ahead although China’s PMI would remain in the expansionary territory, at above 50.0.
But this year’s growth will be better than that of last year’s 4.2 per cent with StanChart projecting a 4.6 per cent growth. Rupa Damodaran