PETALING JAYA: The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) eased to 51.3 in May 2021 from a record high 53.9 in April.
“The latest reading signalled a further improvement in the health of the sector, and the first time back-to-back monthly improvements that have been reported since mid-2018,” IHS Markit said in a statement Tuesday.
A reading above 50 indicates an overall increase compared to the previous month, and below 50 an overall decrease.
IHS said the historical relationship between the PMI and official statistics suggests that GDP broadly stabilised at the start of the year, supported by improved manufacturing output.
It added that the impact of the latest tightening of restrictions was yet to feed through to official statistics, though the latest PMI data suggest that the sector has stagnated during May.
Chief business economist Chris Williamson said the month of May saw a welcome upturn in new orders received by manufacturers.
He said new business had now increased for two consecutive months as global demand continues to revive from the worst of the pandemic.
However, the recent rise in Covid-19 cases both at home and in many key overseas markets led to further disruptions during May, which dampened production growth and led to further supply chain delays.
“Despite the easing of growth in May, the PMI continues to suggest that the second quarter will see the strongest manufacturing upturn since the survey began in 2012, but the concern is that the virus could continue to weaken growth in coming months.
“Future growth expectations took a knock in May, as the renewed wave of infections served as a reminder that the virus remains a significant risk to the outlook,” Williamson said.
IHS said Malaysian manufacturers reported that employment fell slightly for the second month in a row in May as businesses indicated lower production requirements.
In line with this, backlogs of work also broadly stabilised, as a softer rise in new orders relieved pressure on existing capacity in comparison to April.
“Goods producers continued to report significant supply chain delays during May. Supplier delivery times lengthened at a sharp pace once again as restrictions to combat Covid-19 both in Malaysia and key external markets were tightened.
“Shortages of raw materials and shipping containers were also seen to have contributed to shipping delays. That said, the rate of supply chain deterioration eased slightly from April,” IHS said.
It added that difficulties in sourcing and receiving raw materials contributed to a further sharp rise in raw material prices.
“As a result, input costs rose for the twelfth time in as many months in May. Factory gate prices also increased in the latest survey period, as firms partially passed higher costs to clients,” it said.
