In tandem with many other countries’ manufacturing PMI, Malaysia’s manufacturing PMI in February deteriorated further to 48.5 (48.8 in January), impacted by supply disruptions due to the coronavirus (Covid-19) outbreak. Shortages of key raw materials due to the Covid-19 outbreak in mainland China with shipments being delayed and even cancelled in some case heavily impacted manufacturing production.

The downside risk on manufacturing activities remains high due to the virus impact that is expected to continue fuelling supply shortages for many imported inputs and dampening sales in key export markets. Added with a still weak consumer and business sentiments, and labour market, there is more downside risk on 1Q2020 growth, which is expected to be lower than 4Q2019’s GDP growth of 3.6%. However, the additional stimulus measures amounting to RM20bil should potentially cushion the downside risk on the economic growth.

• The Markit Manufacturing Purchasing Managers’ Index (PMI) remained weak. Although it briefly touched 50 in December 2019, the separation between expansion and contraction, on the whole, the manufacturing PMI has been in the contraction region for 2 months.

• The manufacturing PMI in February deteriorated further to 48.5 from 48.8 in January, impacted by supply disruptions due to the coronavirus (Covid-19) outbreak. Shortages of key raw materials due to the Covid-19 outbreak in mainland China, with shipments being delayed and even cancelled in some case heavily impacted manufacturing production.

• In addition to the supply chain issues, headwinds also came from external markets as new export orders fell at the steepest rate since November 2012. Hence, new orders came under strong downwards pressure due to the unfavourable external environment.

• The downside risk on manufacturing activities remains high due to the virus impact that is expected to continue fuelling supply shortages for many imported inputs and dampening sales in key export markets. Added with a still weak consumer and business sentiments, and labour market, there is more downside risk on 1Q2020 growth, which is expected to be lower than 4Q2019’s GDP growth of 3.6%. However, the additional stimulus measures amounting to RM20bil should potentially cushion the downside risk on the economic growth.

Source: AmInvest Research - 3 Mar 2020