Manufacturing activity dips due to COVID-19, CMCO

THE Malaysian manufacturing activity took another dip in Oct, dropping to 48.5 points from the 49.0 recorded in Sept.

In a report by HIS Markit, a business intelligence body, the nation’s Manufacturing Purchasing Managers’ Index (PMI) went down due to the rise in COVID-19 cases and the Government’s decision to reimpose the conditional movement control order (CMCO).

“The slowdown in both output and new order resulted in a decline in business optimism. It also showed a modest deterioration in the health of the sector, though less marked than seen at the height of the pandemic,” it said.

Post the Sabah state election, the Health Ministry said Malaysia was experiencing a “third wave” of the pandemic, with infections reaching up to four digits on certain days.

Since then, Prime Minister Tan Sri Muhyiddin Yassin had reimposed the CMCO on certain places like Sabah and the Klang Valley.

The Pagoh MP even tried persuading the Yang di-Pertuan Agong to proclaim an Emergency to deal with the pandemic but the monarch rejected it.

IHS Markit said Malaysia’s manufacturing sector saw new orders and production moderating itself last month, to an extent greater than in Sept.

“The CMCO is believed to be a key factor behind declining demand and scaling back of production,” it said.

Businesses being cautious

The report also highlighted that new export orders fell last month compared to new business deals registered.

“Weaker new order inflows mean firms were able to deplete their backlogs of work. The resulting reduction in outstanding business was the sharpest since Dec 2018.

“A lack of pressure on capacity resulted in a further dip in employment, although the rate of job cuts continued to soften from what was reported in Aug,” said IHS Markit chief business economist Chris Williamson.

He added that businesses are reluctant to increase their purchases and were holding on to their existing stocks, amid fragile demand.

“Stocks of both purchases and finished goods were depleted last month. Although manufacturers remain confident that output will increase next year, optimism fell sharply from Sept’s nine-month high due to soaring COVID-19 cases and the extension of movement restrictions.

“The respondents that predicted an increase in output hoped that market demand would recover over the next 12 months,” said Williamson.

The Malaysian PMI is compiled using responses based on monthly questionnaires sent to purchasing managers in a panel of around 400 manufacturers. – Nov 2, 2020

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