PMI declines to 49.9 in December

PETALING JAYA: The headline Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) fell from 52.0 in November to 49.9 in December 2017, due to a contraction in new orders.
Despite that, IHS Markit, which compiles the survey, said the rate of contraction was marginal, with weak domestic demand being the key reason behind lower volumes of new business, as new export orders rose for the second month in succession.

There was an increase in demand for Malaysian goods from key markets such as Thailand and the Middle East.
IHS Markit highlighted that business conditions in the Malaysian manufacturing sector broadly stagnated in December, following an improvement in November. Output growth also slowed to a modest pace.
However, firms raised their payroll numbers to meet production requirements despite reports of subdued demand conditions.
On the price front, input cost inflation remained sharp overall and continued to place pressure on firms’ margins.
IHS Markit noted that businesses retained positive forecasts for output over the next 12 months.
“Projections of an improvement in underlying demand conditions was the key reason behind business confidence, according to anecdotal evidence. That said, the level of business sentiment eased from November’s 47-month high and remained weaker than the series average.”
Commenting on the Malaysian Manufacturing PMI survey data, IHS Markit economist Aashna Dodhia said the operating conditions in Malaysia’s manufacturing economy stagnated in December after an improvement in November. “The goods producing sector observed a renewed fall in new orders amid reports of weak demand conditions in the domestic market.”
However, she said on a positive note, international demand for Malaysian goods continued to increase during December albeit slower expansion rate from November’s 46-month high.
“Although inflationary cost pressures eased from the prior month, it remained stronger than the trend observed over the survey history.
This further placed pressure on firms’ margins as their ability to fully pass on higher cost burdens to price-sensitive customers was limited.
“Encouragingly, firms added to their staffing levels in response to greater production. That said, the pace of job creation was only slight overall.”