MANUFACTURING PMI CONTINUES TO WEAKEN

Index registers 47.2 last month, down slightly from February’s reading of 47.6

THE latest Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) indicates deterioration in production trend for local manufacturers, but the outlook for improved sales and output is the strongest in almost a year.

The single-figure indicator of manufacturing performance declined to 47.2 last month, down slightly from February’s reading of 47.6, and below the 50-point line that separated expansion from contraction.

It was the sixth straight month of contraction since October last year.

A deterioration in the production trend reflects tougher demand conditions based on the evidence from the survey provided by PMI panel member companies,

particularly in the overseas markets.

“Headwinds to order book volumes have been apparent in survey data since October last year and the seasonally adjusted New Orders Index slipped below its long-run average last month,” it said in a note yesterday.

The PMI panellists surveyed reported softer demand originating from trading partners in the Asian markets, it added.

“In contrast, there were some mentions that orders from clients in Germany and Japan had picked up,” it added.

However, Nikkei said total overseas sales fell during the latest survey period.

Efficiency gains reportedly helped ease pressures on capacity, but some panel members attributed the backlog depletion to higher staffing levels.

However, manufacturing employment was broadly stable overall last month as hiring in some instances was offset by other firms’ reduced workforce numbers due to softer demand.

“Malaysian manufacturers were cautious towards inventory levels last month, with both preand post-production stocks falling.

“Holdings of finished items were depleted as firms stepped up efforts to ship orders in a timely fashion, while input stocks were cut for efficiency purposes. Subsequently, purchasing activity was lowered,” it said.

The survey data also signalled stable price levels, with input prices and output charges broadly unchanged since February, it added.

Despite the challenges signalled by latest data, Nikkei said Malaysian manufacturers reported their strongest degree of optimism towards future output in almost one year, supported by forecasts of improved sales, new projects and products and successful new contract tenders.