KUALA LUMPUR (April 1): Latest purchasing managers index (PMI) data indicated that Malaysian manufacturers continued to face a challenging business environment at the end of the first quarter, with key survey gauges such as output and new orders falling, but that firms also grew more optimistic about the outlook.

The Nikkei Malaysia PMI registered 47.2 in March, down slightly from February’s reading of 47.6, and below the long-run survey average.

Analysis of comparable historical official data on Malaysian manufacturing output suggests that, at current levels, the survey data are indicative of annual output growth close to 4%, said IHS Markit, which compiles the survey, in a statement today.

“A deterioration in the production trend commonly reflected tougher demand conditions, according to the anecdotal evidence from the survey provided by PMI panel member companies, particularly in overseas markets.

“Headwinds to order book volumes have been apparent in survey data since last October and the seasonally adjusted New Orders Index slipped below its long-run average in March,” it said.

IH Markit said panellists reported softer demand originating from trading partners in Asian markets.

It said that in contrast, there were some mentions that orders from clients in Germany and Japan had picked up.

“Nonetheless, total overseas sales fell during the latest survey period,” it said.

Commenting on the Malaysian Manufacturing PMI survey data, Chris Williamson, Chief Business Economist at IHS Markit, said: “Malaysia’s manufacturing companies reported increasing  headwinds on current business activity in March, though also reported a brightening outlook which adds to hopes that the recent slowdown will start to ease in coming months.

“While several key survey gauges fell in March, it’s important to bear in mind that, when compared against official measures, the survey is still broadly indicative of the economy growing at an annual rate of 4%–4.5%, with manufacturing output increasing at an annual pace of just under 4%. As with many other fast-growing economies, in Malaysia the PMI gauges have to drop much further below 50 to indicate either a contracting manufacturing sector or a decline in GDP.

“Encouragingly, the survey found companies to have become more optimistic about the year ahead, with expectations of future output growth rising to the highest for nearly a year. Indices of purchasing and inventories consequently came off recent lows as companies started to plan for demand in coming months. However, major headwinds persisted, including a fourth successive monthly deterioration in export business, plus growing concerns over the impact of trade wars and slower global economic growth,” said Williamson.