June’s manufacturing PMI fell to its lowest since April 2020 to 39.9 (51.3 in May). The fall was due to movement restriction policies which weighed down production, new orders and exports, besides input prices.

Overall manufacturing activities are expected to experience a strong drag and this would dampen the economic performance.

On that note, GDP for 2021 is projected at 4.0%-4.5%. Nevertheless, the economy is less likely to fall into double-dip due to a low base.

A. Highlights

• June’s manufacturing PMI fell to its lowest since April 2020 to 39.9 (51.3 in May). The fall was due to movement restriction policies to contain the pandemic.
• The impact from movement restrictions resulted in the sharpest slowdown in output and incoming orders since the peak of the initial outbreak of the pandemic in April 2020.
• Domestic production was again affected by softer demand due to disrupted supply chains while new orders and exports shrank.

B. Takeaways

• Manufacturing activities are expected to experience headwinds until the restriction measures are relaxed. The restrictions would crimp production, new orders and exports. On an immediate note, manufacturing in July will remain under downwards pressure.
• Besides, input costs will remain under upwards pressure. Much of it will come from supply chain disruptions and higher raw material prices while production fell. Challenges on the manufacturing operating environment will remain.
• In a nutshell, overall manufacturing activities are expected to experience a strong drag in July. This trend could continue if the current movement restriction remains.
• On that note, GDP for 2021 is projected at 4.0%-4.5%. Nevertheless, the economy is less likely to fall into double-dip due to low base.

Source: AmInvest Research - 2 Jul 2021