KUALA LUMPUR: The headline IHS Markit Malaysia Manufacturing Purchasing Managers' Index (PM) – a composite single-figure indicator of manufacturing performance – edged up from 39.9 in June to 40.1 in July.
IHS Markit said in remaining well below the 50.0 no-change level, the latest reading pointed to a steep decline in operating conditions, albeit one that was fractionally softer than that seen in June.
The firm said Malaysian manufacturers continued to report that operating conditions were severely hampered by a renewed rise in Covid-19 infections.
IHS Markit chief business economist Chris Williamson said the country's manufacturing sector continued to be badly hit by the ongoing pandemic in July, although companies were already planning for better times ahead.
"Production fell sharply for a second successive month as the recent rise in infections and containment measures associated with the Delta variant both dampened demand and disrupted supply chains.
"Both domestic demand and export orders fell sharply at the start of the third quarter, while supplier delays continued to develop at one of the fastest rates yet recorded by the survey," he said.
Williamson said there was better news in terms of the outlook, however, with companies becoming more optimistic after the rise of the Delta variant had pushed confidence in June to its lowest on record.
"More companies are now seeing some light at the end of the tunnel, and employment consequently stabilised.
"There was also better news on prices. Although input cost inflation ticked up slightly, it continued to run well below the steep rates recorded earlier in the year, helping push selling price inflation down to its lowest since February," he added.
IHS Markit said despite headwinds from supply shortages amid a renewed surge in Covid-19 infections, Malaysian manufacturers displayed a renewed sense of optimism regarding the outlook for output in the coming year.
"The degree of sentiment was modest overall, but marked a welcome improvement from June's record low.
"Panel members attributed the improved outlook to hopes that national and international restrictions would lift and aid a recovery in production and sales," it said.