Malaysian manufacturing loses steam in January as export orders fall

For December, local manufacturing activity rose to its highest since September 2018, where Malaysia’s PMI rose to 50.0 on the index, up from 49.5 in the previous month and hitting a 15-month high. — Reuters pic
For December, local manufacturing activity rose to its highest since September 2018, where Malaysia’s PMI rose to 50.0 on the index, up from 49.5 in the previous month and hitting a 15-month high. — Reuters pic

PETALING JAYA, Feb 3 — Malaysia has last month lost its momentum in the manufacturing sector which started since last September, according to the IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI).

A key factor behind this moderation was export orders, which declined during January for the first time in three months.

The headline IHS Markit Malaysia Manufacturing PMI recorded 48.8 in January, down from 50.0 in the previous month.

A PMI score under 50 denotes contraction while a score above 50 signals expansion.

“A hindrance to Malaysia’s manufacturing sector in January was export markets, as survey data showed the first drop in sales to external clients since last October,” it said.

“Some respondents reported an ongoing tough global trading environment at the start of the year.

“As a result, total order book volumes were adversely impacted to the greatest extent since September,” it added.

IHS Markit chief business economist Chris Williamson said having ended 2019 with their best performance for over a year, Malaysia’s manufacturers started 2020 on a softer footing.

He said much of the renewed weakness was a result of falling external demand, with export orders under further pressure as a result of slower growth in key trading partners.

“Even after allowing for usual seasonal variations, business trends can be volatile around the year-end, so we don’t recommend reading too much into one month’s data.

“More importantly, the past four months have seen the strongest PMI readings since 2018, which corresponds with an easing of global trade tensions in recent months,” said Williamson, referring to the report.

Williamson said trade war developments will likely therefore play a major role in determining Malaysia’s export environment in the coming months.

He said IHS Markit’s forecasts are for global growth to pick up pace heading through 2020, in part due to the phase one deal between the US and China helping boost trade, but we could see markets grow more nervous again if the US ratchets-up its focus on Europe.

“The Wuhan coronavirus also poses a key downside risk to the near-term Asia-Pacific economic outlook, albeit growth momentum could recover quickly if the epidemic ends rapidly,” said Williamson.

For December, local manufacturing activity rose to its highest since September 2018, where Malaysia’s PMI rose to 50.0 on the index, up from 49.5 in the previous month and hitting a 15-month high.

Malaysia has had its growth forecast for this year revised downwards by the World Bank, but the government has maintained its projection of 4.8 per cent for the full year.

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