KUALA LUMPUR: The manufacturing sector in Malaysia continued to deteriorate in December 2016, impacted by lower production and worsening new orders, the latest survey from Nikkei showed.
The Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) reported a 47.1 reading in December, the same reading as November, indicating a deterioration at Malaysian manufacturers for the 21st consecutive month. A reading above 50 indicates expansion and one below 50 indicates contraction.
However, Amy Brownbill, economist at IHS Markit, which compiles the survey, forecast consumer prices to strengthen over the new year as manufacturers try to pass on their additional costs.
Brownbill noted that contributing to the overall decline in manufacturing conditions in December 2016 was a fall in production, as has been the case since April 2015.
“Not surprisingly, manufacturers cut back on their buying activity and employment growth slowed to a marginal rate,” she said in a statement yesterday.
“Meanwhile, weakness in the ringgit continued to weigh heavily on goods producers’ cost burdens, with input prices rising at the sharpest rate in the series history,” she added.
In a joint statement yesterday, Nikkei and IHS Markit noted that the rate of decline in production, however, was only moderate overall and was slower than the average of 2016.
Another key reason for the overall decline in manufacturing conditions was a decrease in new orders at Malaysian goods producers, which fell for the 22nd month running in December 2016.
“Almost 24% of the survey panel registered a decline in new work inflows, compared with only 13% that reported an expansion. Firms linked a fall in incoming new work to a decline in both domestic and international demand.
“A drop in international demand was also reflected in the survey data, with new export orders declining at the sharpest rate since June 2016. Greater global competition and a challenging worldwide economy contributed to the fall in new export orders, according to panellists,” said Nikkei and IHS Markit.
On the price front, reports of the weak ringgit drove up input prices at the fastest rate since the survey began in July 2012. Concurrently, employment growth in December 2016 eased from November 2016’s 13-month high to only a marginal rate.
The headline PMI is a composite single-figure indicator of manufacturing performance. It is derived from indicators of new orders, output, employment, suppliers’ delivery times and stocks of purchases.