PETALING JAYA: The manufacturing sector is expected to see modest growth in the second half of 2019 (2H19) amid economic uncertainty after survey data highlighted challenging manufacturing conditions in August.
The IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) recorded 47.4 in August, a fractional decline from July’s 47.6, signalling tough demand conditions and rising cost pressures. Nevertheless, the outlook improved to the most optimistic for nearly six years, encouraging firms to expand their workforces for the first time in three months.
TA Securities chief economist Shazma Juliana Abu Bakar opined that the PMI will not surpass the 50-point threshold this year, given the uncertain demand from the external side.
“The survey indicated slight optimism among respondents but if you look at the uncertain economy, I don’t think it will remain robust in 2H19. GDP is going to be around 4.3-4.6% in 2H19 so we expect a bumpy road ahead. As for manufacturing, it (growth) is going to be modest in 2H19,” she told SunBiz.
“As long as the trade war between China and US is not solved, we still continue to see rising downside risks especially from the external side. But it will be buffered from the domestic side.”
She added that the government will come up with measures to overcome further slowdown in the Malaysian economy during Budget 2020.
“We don’t rule out the possibility of another rate cut in 2H19. We’re worried about the economic conditions, but we don’t think it will be a recession. We don’t think it will come to that level (recession) so soon,” said Shazma.
Bank Negara Malaysia is expected to hold its Monetary Policy Committee meeting next Thursday.
