Although the manufacturing PMI remained above the 50 threshold for two consecutive months with May’s reading at 51.3, there is more downside risk in June due to the latest lockdown. Downside pressure could last for the next 3–4 months depending on how fast the Covid cases curve is being flattened.

Uncertainty remains high. Much now depends on the speed of vaccination with continuous testing and quarantine taking place. On that note, we have slashed our 2021 GDP growth from 5.5% (base) and 4.5% (downside) to 4 0% (base) and 3.0% (downside).

• The manufacturing PMI’s reading slowed down to 51.3 in May from a record high of 53.9 in April, dampened by Covid- 19 restrictions. However, the latest reading still signals an improvement in the manufacturing operating for the second consecutive month.

• It has been above the 50 threshold for two consecutive months. The uptrend is supported by the expansion of new orders and output for the second straight month with firms reporting stronger domestic demand.

• But the month of June will present a challenge. The imposition of a lockdown with manufacturing allowed to operate at 60% capacity will impact activities in this sector. Supply chain disruptions will add pressure on backlogs and deliveries.

• And the risk of this lockdown going beyond two weeks (if the number of infections remain high) cannot be ruled out. Even if there are gradual openings after the two-week period, the risk of another run-up in the number of cases remains.

• Uncertainty remains high. Much now depends on the speed of vaccination with continuous testing and quarantine taking place. On that note we have slashed our 2021 GDP growth from 5.5% (base) and 4.5% (downside) to 4 0% (base) and 3.0% (downside).

Source: AmInvest Research - 2 Jun 2021