Malaysia’s PMI rises sharply in May, indicating economic downturn have bottomed out – IHS Markit

The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) rose sharply to 45.6 in May 2020 from the record low of 31.3 in April 2020 survey.

In a note today, IHS Markit said Malaysia’s manufacturing sector showed signs of approaching stabilisation midway through the second quarter, with rates of reduction in output, new orders and employment all easing considerably.

Commenting on the latest results of the survey, chief business economist Chris Williamson said a strong rise in the PMI provided the first major indication that the economic downturn caused by the Covid-19 pandemic appears to have bottomed out.

“While manufacturing activity continued to fall at a steep rate in May, declines in output and order books were notably less severe than seen in April,” he said.

Barring any second wave of infections, Williamson opined that the coming months should see signs of at least stabilisation as restrictions to contain the virus are gradually eased both at home and in export markets.

“While we may see a return to growth as we head into the third quarter, it still looks like a recovery to pre-pandemic production and gross domestic product (GDP) levels will be long and slow.

“Export demand, in particular, looks set to be weak for some time as COVID-19 restrictions will inevitably need to stay in place and continue to dampen economic activity around the world,” he added.

According to IHS Markit, despite the large month-on-month rise in May’s headline figure, the reading of 45.6 remained below the neutral 50.0 mark and was therefore indicative of a further deterioration in manufacturing sector conditions.

“That said, the latest decline was considerably weaker than at the start of the second quarter,” it added.

The latest survey data pointed to a further reduction in manufacturing output across Malaysia, although the rate of contraction eased substantially since April.

The downturn lost strength amid reports that some firms had restarted production following a partial lifting of lockdown rules, it said.

IHS Market said new orders placed with Malaysian goods producers continued to fall during May and weak export demand persisted in May, weighing heavily on overall order books.

Although the deterioration in demand was solid, it significantly weaker than seen in April, it said.

“Of the minority of companies that recorded sales growth, clients reopening their businesses had led to new work intakes,” it added.

Meanwhile, IHS Market said manufacturing employment in Malaysia was broadly stable during May, with 98 per cent of firms signalling no change in their payrolls.

This was in contrast to April, where staffing numbers fell at the fastest rate on record.

“Looking ahead, there were signs of optimism as survey data pointed to a rise in business confidence.

“The Future Output Index rose to a three-month high, with stronger sentiment underpinned by expectations of a recovery in demand. Firms hoped that this would drive production volumes higher in the coming months,” it said.

Source: Bernama