KUALA LUMPUR, July 1 ― Operating conditions among Malaysian manufacturers dipped to a level not seen since the middle of last year as a renewed Covid-19 wave forced the government to set new restrictions, according to IHS Markit analytics firm.

In its Purchasing Managers’ Index (PMI) for June, Malaysia registered a score of just 39.9 or down sharply from 51.3 in May.

A score below 50 denotes contraction while a score above 50 signals expansion.

“Malaysia’s manufacturers reported a renewed downturn in June as the recent rise in Covid-19 infections and associated containment measures once again dampened demand, stymied production and disrupted supply chains,” said Chris Williamson, the chief business economist at IHS Markit.

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Manufacturers also reported negative outlooks for the first time since the arrival of the pandemic in March 2020.

Williamson said that while there were some positive notes such as reduced inflationary pressure and stronger staff retention, business confidence has still fallen to the lowest it has been since the index was started nearly a decade ago.

Companies were increasingly concerned about the long-term effects of the pandemic that most countries previously believed would be contained with the arrival of vaccines, but which has instead become resurgent through new variants.

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“If such low confidence persists, companies may grow increasingly reluctant to hold on to staff, and will instead move further towards focusing on cost reduction.”

IHS Markit said the decline in PMI showed that the pandemic remained the biggest threat to Malaysia’s economic recovery.

In the Asean region, overall manufacturing output also declined to the lowest level since July 2020, as only Indonesia and the Philippines reported expansions.

Earlier this week, Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz conceded that Malaysia would have to lower its economic growth forecast for this year due to the National Recovery Plan’s restriction.

Last week, the World Bank already cut its GDP growth projection for Malaysia from between 6 and 7 per cent to between 4 and 5 per cent for 2021.

Malaysia remains in Phase One of the NRP in which only approved essential services may operate.

It is unclear when the country will move to the second phase as daily Covid-19 cases — one of three indicators used in the NRP — were over 50 per cent higher than the 4,000 a day limit set.