KUALA LUMPUR: Malaysia’s manufacturing sector has cut production volume last month in response to the Covid-19 pandemic, IHS Markit said.
The firm said the global pandemic had reduced demand and restricted operating capacities due to severely delayed deliveries of inputs.
IHS Matket expects Malaysian manufacturers to make further cuts in production in the next 12 months.
Concerns that the global pandemic would have a longlasting damage resulted in sentiment falling to its lowest level since January 2016.
The negative outlook was also linked to the prospect of sustained supply chain disruption, it added.
IHS Markit said new business from domestic and external clients had fallen as the negative economic impact from the pandemic intensified in March.
The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) fell to 48.4 in March, from 48.5 in February, signalling a further drop in momentum across the Malaysian goods-producing sector.
The output index fell to its lowest level since June 2016, signalling a sharp slowdown in manufacturing production in Malaysia as demand and supplyside factors adversely impacted output volumes.
IHS Markit chief business economist Chris Williamson said the marginal fall in the PMI masked steeper deteriorations in production and new orders trends, as the headline index included supplier delivery times as one of its five components.
“While supply chain delays are usually seen as a positive development, reflecting rising demand and accelerating economic growth, the current survey is seeing record degrees of supply chain disruption from the coronavirus outbreak, notably from China.
“These supply shortages are hitting production capacities and constraining growth,” he said in a statement today.
He added that supply from China should start to improve in coming weeks, helping lift some of the production constraints.
But the next problem will be one of slumping global demand for many goods as both business and households around the world spend less due to closures and lockdowns.
“Worse therefore looks set to come in the second quarter, both in terms of exports and domestic demand in Malaysia, but as yet there is great uncertainty as to how long the global slump will persist.
"Until more is known about the likely length of the Covid-19 pandemic, businesses are likely to remain highly risk averse, as evidenced already by companies’ future expectations for the year ahead sliding to an all-time low,” Williamson said.
Latest survey data pointed to the sharpest decrease in new order intakes since data collection began in July 2012.
IHS Markit noted that public health measures aimed at curbing the spread of Covid-19 had led to a fall in demand.
The global pandemic also had a noticeable impact on external markets, as evidenced by a sharp drop in export demand during March.
The rate of decline was broadly in line with that seen in February following the initial negative shock to demand from China.
Supply-side hindrances also restricted production schedules in March.
IHS Markit said Malaysian manufacturers also reduced their inventories of finished goods during March.
Some of the stocks were used to complete outstanding orders, although numerous panel members attributed inventory depletion to reduced output levels.