KUALA LUMPUR: The Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) fell to a five-month low of 47.1 in November, from 47.2 in October, driven by the sharpest decline in new orders since the survey series started in July 2012.
IHS Markit, which reported the index, said the latest survey data pointed to worsening operating conditions in Malaysia’s goods-producing sector in which production contracted at a solid pace.
The data suggested that a fall in international demand also contributed to the overall decrease in total new orders, it said in a statement yesterday.
The November PMI of 47.1, while little changed from October’s reading, was lower than the series’ average and signalled deterioration in manufacturing conditions, said IHS Markit.
“Reductions in production, new orders and stocks of purchases, and improved delivery times all contributed to the sub-50.0 headline PMI reading,” said IHS Markit.
Production contracted for the 20th consecutive month in November. The rate of decline eased slightly from October, but was nevertheless solid in the context of historical data.
“Panellists mentioned reduced demand and challenging economic conditions as factors behind the reduction in output. Underpinning the drop in output, new orders contracted at the sharpest rate in the series’ history,” said IHS Markit.
As well as unstable market conditions, firms commented on a lack of new product initiatives leading to the drop in total sales, it said.
“Also contributing to the fall in total sales, new export orders declined for the sixth successive month. Consequently, firms cut back on buying activity at the quickest rate in seven months,” it added.
Job creation, on the other hand, rose at the fastest pace in over a year, said IHS Markit.
“Cost burdens rose at the joint sharpest rate in the series’ history. Firms linked this to higher raw material prices stemming from unfavourable exchange rates and greater labour costs,” it said.
Commenting on the data, IHS Markit economist Amy Brownbill said the Malaysian manufacturing sector continued to deteriorate midway through the final quarter of 2016.
“Total new orders contracted at the sharpest rate in the series’ history, driven partly by a fall in international demand. As a result, goods producers cut back on their buying activity at the quickest rate in seven months.
“On a more positive note, employment growth picked up to a 13-month high, suggesting firms are optimistic towards the outlook,” she said.
Brownbill said manufacturers’ profit margins were hit harder, as input prices rose at the joint fastest rate in the series’ history.
“Firms linked this to greater raw material costs stemming from the weakness of the Malaysian ringgit,” she said.
The Nikkei Malaysia Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives of over 450 industrial companies. It is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases, while a figure greater than 50 indicates overall improvement of sector operating conditions.