KUALA LUMPUR (July 1): Malaysia's manufacturing production decreased for the 15th consecutive month in June, and at the quickest rate since October 2012, led by a marked fall in total new orders, says Nikkei.
The headline Nikkei Malaysia Manufacturing Purchasing Managers' Index (PMI), which gauges the country's manufacturing sector's performance, posted 47.1 in June, down from 47.2 in May. Any figure greater than 50 indicates expansion.
"Underpinning the contraction in total new orders was a drop in international demand, with new export orders declining for the first time in five months.
"As a result, employment stagnated and manufacturers cut back on buying activity for the thirteenth consecutive month," said Nikkei in a statement today.
On the price front, Nikkei said input prices rose at the second fastest rate since the survey began in July 2012, leading to a further increase in charges.
It said a drop in new orders was frequently cited by survey respondents as the main factor behind the fall in production
"Total new orders decreased at the quickest rate since December last year. Panellists mentioned challenging economic conditions and a fall in international demand as factors behind the fall in sales," it said.
Nikkei said new orders from abroad contracted for the first time since the start of 2016 in June. Furthermore, the rate of decline was the sharpest in over 3½ years. Firms mainly linked falls in international demand to the increase in sales tax reducing global competitiveness, and unstable market conditions.
Markit, which compiled the survey, economist Amy Brownbill said a number of firms blamed the increase in the sales tax as having a detrimental effect on global competitiveness.
"As a result, employment stagnated suggesting firms are cautious towards the outlook of the Malaysian economy," she said.
Brownbill also noted that inflationary pressures intensified to the sharpest extent in over 2½ years, resulting from greater raw material costs stemming from an unfavourable exchange rate and the increase in sales tax.