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Marginal improvement in manufacturing conditions in Malaysia

Staff Writer | February 5, 2018
Following a broad stagnation in December, manufacturing conditions improved at the start of 2018, albeit only marginally.
manufacturing Malaysia
Malaysia   Nikkei Malaysia Manufacturing PMI
The overall upturn was mainly driven by a renewed rise in new business.[break]

In response to greater inflows of new work, firms raised their payroll numbers during January.

Despite easing slightly, input cost inflation remained sharp overall.

Subsequently, firms raised their average selling prices to pass on higher cost burdens to customers.

The headline Nikkei Malaysia Manufacturing Purchasing Managers’ IndexTM (PMI) – a composite single-figure indicator of manufacturing performance – rose from 49.9 in December to 50.5 in January.

This was consistent with a marginal improvement in operating conditions across Malaysia’s manufacturing sector.

The health of the sector has strengthened in two of the past three months.

The improvement was recorded despite a broad stagnation in output, following increases in each of the previous five months.

Malaysia’s goods-producing sector recorded a renewed increase in new business at the start of the first quarter.

Panellists linked a rise in new orders to improved underlying demand conditions.

That said, the rate of expansion was marginal.

New export orders rose for the third consecutive month.

Europe and Asia were cited by panellists as key sources of new client wins.

Reflecting greater inflows of new work, Malaysian manufacturers raised their payroll numbers for the third month in succession during January.

That said, the rate of job creation was marginal.

Nikkei Malaysia Manufacturing PMI 2012 2013 2014 2015 2016 2017 40 45 50 55 60 50 = no change on previous month, S.


Increasing rate of expansion Increasing rate of contraction Sources: Nikkei, IHS Markit Input buying fell for the second month in succession during January.

According to anecdotal evidence, lacklustre demand led firms to adopt a more cautious approach towards input buying.

That said, the pace of contraction eased to a fractional pace.

Meanwhile, firms reduced their pre-production inventories in January, but at a marginal pace.

Stocks of finished goods also fell, the first time in three months in which this has been the case.

On the price front, firms faced higher input costs.

According to anecdotal evidence, higher raw material prices emanated from currency weakness.

Despite easing for the second month running, input cost inflation remained sharp overall.

Concurrently, firms raised their average selling prices for the fifteenth consecutive month.

Panellists reportedly raised their factory gate charges to pass on higher input costs to customers.

Amid reports of difficulties in obtaining raw materials, average lead times increased during January.

The level of positive sentiment towards the 12- month outlook for output was the joint-strongest since December 2013.

Expectations of an improvement in demand conditions and company expansion plans were the key factors behind business confidence, according to anecdotal evidence.