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Malaysian manufacturing growth picks up in July: S&P Global PMI

The S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) rose to 50.6 in July 2022 from 50.4 in the previous month, the first expansion since December 2021, as new orders helped boost output despite headwinds of falling export demand, persistent supply constraints and rising costs.

The latest reading pointed to an improvement in the health of the sector that was nonetheless the strongest reported since April, albeit only marginally, extending the current period of growth to four months.

S&P Global Market Intelligence chief business economist Chris Williamson said business conditions are improving yet remain tough, with firms struggling against headwinds of falling export demand, persistent supply constraints and rising prices. However, July saw the best expansion in output so far this year, in part reflecting the gradual revival of manufacturing as the worst of the pandemic impact fades.

“Looking at the historical relationship between the PMI and official statistics, the latest reading signalled that industrial production is now increasing gradually after broadly stagnating throughout the first half of 2022, to hint at an encouraging start to economic growth in the third quarter. A major uncertainty remains the path of global demand, as recession risks have intensified in the US and Europe, which could severely limit any export derived growth.”

New export orders declined for the first time since March and at the quickest pace for 10 months amid global supply chain issues and subdued overseas demand.

Input costs increased further in July, reflecting higher prices for a range of raw materials and freight costs. However, the overall rate of inflation eased to the lowest for 10 months as some firms reported lower costs for metals and other commodities. Manufacturers sought to partially pass higher costs to clients by raising output charges. In line with the trend for certain input prices, factory gate inflation eased to the softest since February.

Shortages of raw materials and improved demand conditions led to firms increasing their purchases of raw materials and other inputs for the first time in three months. At the same time, stocks of purchases stagnated as firms utilised increased purchases to fulfil orders amid delays in receiving shipments. Supplier delivery times lengthened at a solid pace in July, though the deterioration was softer than the average seen over the current 32-month period of deterioration to hint at some easing of supply constraints.

Malaysian manufacturers reported a further reduction in capacity pressure at the start of the third quarter, as evidenced by a second successive decline in backlogs of work. At the same time, businesses reported that workforce numbers were scaled back for the sixth successive month,

though the rate of job shedding was only marginal.

Looking ahead, manufacturers displayed stronger optimism regarding the outlook for output over the coming year. The overall degree of sentiment improved to the highest since February amid hopes of a stronger recovery in demand once price and supply pressures ease following the lifting of pandemic restrictions.

  • The Sun Daily