THE 18th FMM-MIER Business Conditions Survey, a bi-annual collaboration between the Federation of Malaysian Manufacturers (FMM) and the Malaysian Institute of Economic Research (MIER), revealed that while manufacturing activity picked up conservatively in 2H 2020, the outlook for 1H 2021 remains challenging at best.
For the 2H 2020 period, most indicators registered readings below the 100-point threshold level of optimism, an indication that overall business conditions in 2H 2020 had remained subdued.
“Manufacturers’ outlook for their businesses in early 2021 is equally cautious,” commented FMM president Tan Sri Soh Thian Lai on the latest findings.
“Except for cost of production and employment which are expected to trend up, the outlook for local and export sales, production, capacity utilisation and capital investment is cool going forward.”
Tracking business confidence via the FMM-MIER Business Conditions Index (FMM BCI) covering the actual performance in 2H 2020 and outlook for 1H 2021, the survey which drew 652 respondents nationwide was conducted from Dec 23 last year till Jan 31 this year.
Undoubtedly, the resurgence of COVID-19 cases in 4Q 2020 has continued to pose challenges for both the Government and businesses.
“With constrains on mobility and demand going forward, respondents are cautious on their business projections for 1H 2021 as reflected in the latest forward-looking indicators of the survey,” noted Soh.
“While most of these indicators have improved from the previous period, their persistent stay below the optimism threshold is an implication that cautiousness among manufacturers has continued to prevail in their business outlook for the next six months.”
Below are few notable findings:
- The expected index for business activity rose to 87 – but with its reading below the optimism threshold – implies that respondents are cautiously hopeful of a pick-up in their businesses soon.
- The prognosis for local and export sales for 1H 2021 is equally subdued. Registering below the optimism threshold, both the expected indexes for local sales and export sales stood at 74 and 88, respectively, reflecting cautiousness on the part of the respondents.
- The indexes for expected production volume and capacity utilisation are also below the optimism threshold. At 91 and 92, respectively, these are additional signs that respondents are cautiously projecting a pick-up in these aspects in 1H 2021.
- The expected cost of production index rose from the prior survey to 155 currently, an inference that production is likely to cost more in the coming months.
- Capex and employment are expected to shift higher in 1H 2021 as shown by the expected indexes which increased from the preceding survey to 98 and 102 in the current survey respectively. – March 2, 2021
