THE headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) fell sharply to 31.3 in April from 48.4 in March, as the manufacturing sector came under heavy pressure due to measures implemented to tackle the Covid-19 pandemic.
IHS Markit headline PMI is a composite single-figure indicator of manufacturing performance.
In a note today, IHS Markit said April’s reading pointed to a sharp decline in business conditions.
“The most commonly cited factor weighing on the manufacturing economy in April was the implementation of restrictions — both at home and in exports markets — to contain the spread of the coronavirus, which severely restricted demand and often meant (manufactured) goods producers operated well below full capacity,” it said.
IHS Markit said in some cases, firms completely suspended output due to insufficient staff numbers and reduced intakes of new work.
“Manufacturing production consequently declined at an unprecedented rate,” it said, adding that new orders also fell sharply in April due to the lockdowns implemented both domestically and overseas.
Some companies indicated that key clients had shut down, it said.
IHS Markit said the latest data also signalled a substantial and survey-record decline in export demand in April, with approximately 83% of companies reporting lower orders from abroad.
“Supply chain delays also impeded manufacturers in April, with firms recording the sharpest month-to-month lengthening in delivery times since data collection started almost eight years ago,” it said.
The combined effects of lower production requirements and longer vendor delivery times led to the sharpest drop in purchasing activity in the survey’s history.
“Employment declined modestly among the surveyed companies in April,” it said.
Commenting on the survey results, IHS Markit chief business economist Chris Williamson said it was no surprise to see that measures taken to contain the Covid-19 outbreak led to a sharp fall in manufacturing activity in April.
“Domestic demand was hit hard by containment measures, and production at many firms was curbed by business closures.
“Export demand collapsed as governments around the world took drastic actions to prevent healthcare systems from being overwhelmed,” he said.
Williamson 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 moderating, helping to drive a recovery in production,” he said.
However, Williamson noted that a recovery was likely to be sluggish, as global demand looked set to remain relatively subdued for some time. — May 4, 2020, Bernama
