Manufacturing PMI of Malaysia slips to 48.5 in February, Covid-19 affects export orders

Malaysia’s manufacturing purchasing managers’ index ( PMI) slipped to 48.5 in February from 48.8 in January, as the manufacturing sector was adversely impacted by a dip in export order, lack of raw materials and coronavirus ( Covid-19 ) outbreak in China.
For consecutive two months, the PMI was below 50 mark of the entrepreneurs confidence threshold after Malaysia’s PMI returned to 50 last December.
In its report, the IHS Markit said the latest figure reflected that challenge faced by the manufacturing sector as the delivery of raw materials from China was disrupted by Covid-19.
“Orders from overseas were severely impacted. New orders plunged to a record low in seven years. The negative demand and supply factors led to a softening trend in manufacturing production,’’ it said.
In February, business operations were severely disrupted by supply chain, it said.
“It was sort of a new record for the delay by suppliers to supply goods since this report started in July 2012. Panel members reported shortages of raw materials caused by the Covid-19 outbreak in China where shipments were either delayed or cancelled,’’ it said.
As a result, the production of manufacturing sector was affected by the shortage of raw materials. The survey’s output index dropped to an eight-month low in February, showing softening in its momentum.
Apart from supply chain issues, overseas orders plummeted to a new record low since November 2012, said IHS Markit.
China, which is Malaysia’s main client in overseas market, slowed down in orders in February since Covid – 19 outbreak.
The report revealed that the total export orders plunged to its lowest since last September. Overall the market turned soft and sales remain sluggish.
Meanwhile, jobs in the manufacturing sectors were also reduced as some companies opted not to renew employment contracts of some staff as production was affected by uncertainties in supply of raw materials.
However, IHS Markit said the outlook for manufacturing output remained positive for the next 12 months. Some companies foresee economic growth will be accelerated.
“The degree of optimism dipped to a 20-month low due to unstable supply of raw materials and demand conditions impacted the confidence level,’’ it said.
IHS Markit chief business economist Chris Williamson said the manufacturing sector of Malaysia reported a double hit from the coronavirus in February.
“The shortage of raw materials from China constrained the output of manufacturing sectors in Malaysia. Export market turned soft due to Covid -19 outbreak in China. China extended the Chinese New Year holidays in order to contain the outbreak which in return, affected the supply chain of raw materials from China,’’ he said.