KUALA LUMPUR: Malaysia’s manufacturing sector are facing further challenges based on the June data, with demand conditions softening while fewer new orders from international clients also weighed on production volumes, said IHS Markit.
Nevertheless, IHS said companies had anticipated that the current difficulties would be short-lived, as business confidence about the outlook strengthened to its highest since October 2013.
IHS Markit said Malaysia’s Nikkei Manufacturing Purchasing Managers’ Index (PMI) had slipped to 47.8 in June from 48.8 in May.
“Latest survey data of the Nikkei Malaysia Manufacturing PMI showed that overall, the PMI is broadly indicative of annual GDP growth of about four per cent,” it said in a statement today.
IHS Markit which compiles the data, said manufacturing output continued to be restrained in June by challenging demand conditions, notably from export markets.
Although the survey's production index fell for a second month in succession, the average for the second quarter as a whole was above that seen in the opening quarter of 2019.
IHS markit said analysis of comparable historical official data on Malaysian manufacturing output had suggested that, at current levels, the survey’s output index signalled annual production growth of just over three per cent.
It said despite the more challenging current environment for Malaysian manufacturers, businesses became increasingly optimistic towards the coming 12 months in June, with output expectations strengthening for the fourth consecutive month.
Overall, optimism was at its highest since October 2013, reflecting positive sales forecasts and planned capacity enhancements.
IHS Markit chief business economist Chris Williamson said operating conditions had remained challenging for Malaysia’s manufacturers in June, once again reflecting tough trading in export markets.
He said global economic growth had slowed so far this year, with the global PMI sinking to a three-year low in May, which had hit export demand.
“However, even with the current soft patch, the PMI is indicative of manufacturing helping drive a rebound in the annual pace of economic growth from the slowdown to 4.5 per cent seen in the first quarter, albeit likely remaining below 5 per cent in the second quarter.
"Business optimism about the future continued to be dogged by worries about the impact of the US-China trade war on the global economy but has risen to its highest since late-2013.
"Wee see increasing numbers of firms stepped up their marketing and sales efforts and reported new projects, products and investments amid signs that underlying sales growth has improved,” said Williamson.