PETALING JAYA: The Malaysian manufacturing sector reported a further increase in growth momentum in the fourth quarter (Q4)of 2021, as operating conditions improved at the quickest pace since April.
The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI), an indicator of manufacturing performance in the country, rose from 52.3 in November to 52.8 in December, indicating a stronger improvement in the health of the sector.
As a result, the average performance over the final quarter was the strongest quarterly performance since the survey began in 2012, IHS Markit said in a statement.
It said that businesses reported faster expansions in both production levels and new orders as the manufacturing economy rebounded following the lifting of pandemic restrictions and demand recovered.
Despite the additional pressure on production lines, manufacturers scaled down workforces in December, it said.
IHS Markit said that businesses continued to report severely disrupted supply chains, with material shortages and delivery delays remaining widespread.
This contributed to a further steep increase in input costs, it noted.
“The further easing of Covid-19 restrictions alleviated pressures faced by the Malaysian manufacturing sector and provided momentum for growth in December.
“The average reading of the headline PMI in Q4 was the strongest quarterly performance recorded since the survey began in July 2012, as output and new order growth reached eight-month highs respectively.
“Operating conditions remain tough nonetheless, with supply chain delays as well as material labour shortages widely reported across the sector,” economist at IHS Markit Usamah Bhatti said in the statement.
He said business expectations for the coming year remained strong overall as a fifth of companies reported optimism that the worst of the pandemic has passed.
“That said, the degree of optimism eased from November as the outlook remained relatively clouded due to uncertainty regarding the duration of supply chain disruptions, raw material shortages and further disruption caused by new variants of Covid-19,” Bhatti added.
Based on the historical relationship between the PMI and official statistics, the latest reading is representative of a solid expansion in manufacturing production and gross domestic product, as the survey pointed to a broad recovery from the impact of Covid-19, it said.
December data suggested that output rose for the third month running, it added.
“The pace of expansion was moderate and was the quickest since April. Firms commonly attributed the rise to stronger demand as pandemic restrictions were eased. New order volumes also increased at the end of the year, with the rate of growth reaching an eight-month high,” the research house said.
It further added that firms noted that stronger client confidence had boosted demand in both domestic and external markets.
Concurrently, new export sales returned to expansion territory in December, as stronger demand in the United States and China contributed to a fractional rise in new business from abroad, it said.Firms also highlighted a fifth consecutive rise in outstanding business in December as a lack of raw materials and labour placed additional strain on capacity as new orders improved, it said.
Despite pressure on capacity, IHS Markit said there was a renewed fall in employment at Malaysian manufacturing firms, with producers often noting a lack of foreign work permits being issued due to ongoing border restrictions.
Lengthening average lead times often meant that businesses had difficulties in sourcing raw materials for production, it also noted.
However, it said that stronger new order growth meant that manufacturers raised purchasing activity at a solid pace in an effort to meet demand as well as build safety stocks.
Source: https://www.thestar.com.my/business/business-news/2022/01/04/businesses-report-faster-expansion-in-q4