November’s poor manufacturing PMI did not come as surprise
KUCHING: The poor manufacturing Purchasing Managers Index ( PMI) reading in November did not come as a surprise as it was inflicted by the rising Covid-19 cases both locally and and abroad, analysts say of Malaysia’s latest PMI.
AmBank Research gathered that the manufacturing PMI remained in the contraction region for the fourth straight month, with November’s numbers coming in at 48.4, marginally lower than October’s 48.5.
“Our performance is somewhat in contrast with the Asean trend which rose to the 50 threshold (which separates expansion from contraction) for the first time since March,” the research firm said.
“The poor manufacturing PMI reading in November did not come as a surprise. With the rise in the number of Covid-19 cases both locally and and abroad, added with the restrictive measures to contain the virus spread, these weighed on both the supply and demand.
“In the case of demand, there is a drop for manufactured goods. Supply chains were seen
facing challenges to deliver inputs in a timely manner.
“Thus, businesses scaled back on their production.”
Looking at the past two months’ manufacturing PMI data, AmBank Research saw the good side which is that it did not present a similar sharp drop as witnessed in April which fell to 35.6 due to the restrictive measures.
“Benchmarking against the first wave of the virus spread and the restrictive measures imposed, this time around the drop is far more moderate.
“This could in part be due to the conditional movement control order ( CMCO) being more targeted, with less adverse implications on bot supply and demand.”
The research firm further noted that based on the first two months of manufacturing PMI data, it somewhat suggests that the fourth quarter of 2020 (4Q20) gross domestic product ( GDP) could lose some steam.
“A very preliminary estimation shows the GDP could fall within the range of three per cent to 3.8 per cent.
“This is in part due to subdued demand while businesses are experiencing capacity pressure with backlogs of work reducing that result in a dip in holdings of raw materials and semi-finished goods.”
Meanwhile, Affin Hwang Investment Bank Bhd ( Affin Hwang Capital) highlighted that domestically, in Malaysia, IHS Markit guided that the historical comparison between PMI and GDP suggests that GDP continued to trend toward stabilisation however manufacturing output has slowed following the rise in Covid-19 cases in the country.