BUSINESS activities in Malaysia had plummeted in 1H 2021 amid a tightening of the COVID-19 lockdowns which piled further strains on the manufacturing sector.
Except for the cost of production, the FMM-MIER Business Conditions Survey 1H 2021 revealed that all other current and forward-looking indicators in the latest survey registered lower than 2H 2020, a sign that 1H 2021 and eventually the rest of 2021 will be a very challenging period for manufacturers.
The bi-annual joint survey by the Federation of Malaysian Manufacturers (FMM) and the Malaysian Institute of Economic Research (MIER) which drew 687 respondents nationwide was conducted from July 16 to Aug 16.
The general business activity index plunged far below the 100-point optimism threshold to 65, losing 36 points from 2H 2020.
Some 54% of the respondents reported a drop in their business activity in 1H 2021, up from 37% in 2H 2020. With 19% notching up their business activity, this proportion represents only half of the prior period’s 38%.
According to the survey, local sales performed worse than export sales in 1H 2021. Reflecting this are the latest indexes for current local and export sales which dropped to 56 and 71 respectively from 2H 2020.
Some 57% of those who sell locally reported lower sales, while only 13% sold more in recent months. Among those who export, 20% enjoyed higher sales but 49% were hit by lower sales.
“The current business conditions are expected to continue into 2H 2021 as the COVID-19 pandemic continues to cast uncertainties on the economy and prospects of their firms going forward,” envisages FMM’s president Tan Sri Soh Thian Lai.
While production costs are expected to climb higher, all the other indicators have posted readings below the demarcation level of optimism, a connotation that the outlook for the manufacturing sector is lacklustre in the coming months.”
Business activity for 2H 2021 is expected to remain as slow as in 1H 2021. The index for expected business activity fell to 60 from 87 points previously with 55% of the respondents anticipating their business to be equally slow for the rest of the year. Only 15% are positive that their business will pick up soon.
The expected indexes for both local and export sales declined to 51 and 68 respectively, an implication that domestic and external demand will likely remain weak in the coming months as well.
Some 59% of the respondents are forecasting poor local sales in 2H 2021 with the same expectations from half of those who export.
Weak sales are dampening the outlook for production and capacity utilisation. Both the expected indexes for these indicators fell from the previous survey to 62 and 60 respectively, suggesting that a decrease in production and capacity utilisation can be expected in 2H 2021. – Sept 1, 2021
