Marginal expansion for manufacturing

PETALING JAYA: Manufacturing conditions in Malaysia were broadly stagnant last month following a marginal expansion at the start of the year, according to the latest Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) reading.

The headline Nikkei Malaysia Manufacturing PMI, a composite single-figure indicator of manufacturing performance, fell to 49.9 in February from 50.5 in the preceding month.

A reading above 50 indicates expansion, while a reading less than 50 indicates contraction.

“February data painted a mixed picture, as manufacturing conditions stagnated across Malaysia,” said Aashna Dodhia, economist at IHS Markit, which compiled the survey.

“Output growth was accompanied with greater payroll numbers across the sector but demand for Malaysian-produced goods at both home and from international markets fell slightly,” she noted.

Dodhia added that on the price front, higher input costs placed further pressure on firms’ margins, as they were restricted in their ability to fully pass on higher cost burdens to price-sensitive clients.

According to IHS Markit, the downward movement in the headline PMI last month was driven by a reduction in new orders.

It noted that survey respondents commented on weak underlying demand conditions. That said, the rate of decline was marginal.

Meanwhile, production at Malaysian manufacturers rose for the seventh consecutive month during February.

Firms associated the rise in output with improved economic conditions. However, the rate of growth was marginal.

New export orders declined during February, thereby ending a three-month sequence of growth, IHS Markit said.

It noted that some panellists mentioned a fall in demand for Malaysian goods from key export markets, especially Europe and the United States. The pace of contraction, however, was marginal.

On a positive note, IHS Markit said manufacturers remained optimistic towards the 12-month outlook for output, with an expected improvement in underlying demand being the key factor behind the positive sentiment.