KUALA LUMPUR (May 4): The Malaysian manufacturing sector came under heavy pressure during April as measures implemented to tackle the spread of Covid-19 caused firms to either suspend production or operate well below full capacity.
According to IHS Markit, lockdown measures both domestically and overseas had a considerable impact on demand, which fell at a survey-record pace.
The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) slumped to 31.3 in April from 48.4 in March.
IHS Markit said supplier deliveries were also heavily affected by the movement control order, restricting firms' ability to purchase vital materials.
It said the most commonly cited factor weighing on the manufacturing economy during April was the implementation of restrictions both at home and in export markets to contain the spread of the coronavirus, which severely restricted demand and often meant goods producers operated well below full capacity.
In some cases, it said firms completely suspended output due to insufficient staff numbers and reduced intakes of new work.
Manufacturing production consequently declined at an unprecedented rate.
IHS Markit said new orders fell sharply during April as a result of the global Covid-19 pandemic, which had resulted in lockdowns being implemented at both domestically and overseas.
It said some companies indicated that key clients had shut down.
Latest data also signalled a substantial and survey-record decline in export demand during April, with approximately 83% of companies reporting lower orders from abroad, it said.
IHS Markit said the combined effect of lower production requirements and longer vendor delivery times led to the sharpest drop in purchasing activity in the survey history during April.
It said stocks of inputs also fell markedly as firms tightened their inventories to contain costs.
Employment declined modestly among the surveyed companies in April.
Where job losses were reported, panel members linked this to the movement control order, which prevented some staff from working.
That said, approximately 95% of firms reported unchanged workforce numbers.
IHS Markit chief business economist Chris Williamson said it is no surprise to see that measures taken to contain the Covid-19 outbreak led to a sharp fall in manufacturing activity in April.
He said domestic demand was hit hard by containment measures and production at many firms was curbed by business closures.
Williamson said export demand, meanwhile, collapsed as governments around the world took drastic action to prevent healthcare systems from being overwhelmed.
He said it was reassuring to see only a modest fall in employment, as the vast majority of firms held on to staff to safeguard longer term production capacity.
“Business expectations for the year ahead also ticked higher, as more companies saw prospects improve.
“In that respect, with increasing numbers of governments looking at ways to ease Covid-19 restrictions, it’s likely that we will soon see the rate of export decline moderate, helping drive a recovery in production.
“A recovery is nevertheless likely to be sluggish, as global demand looks set to remain relatively subdued for some time."