September’s IHS Markit Manufacturing PMI improved to 48.1 albeit still in the contraction region for the fourth consecutive month. The smaller contraction was due by a narrower fall in output volumes, new order inflows, and export orders.

While we expect the economic performance for 3Q21 to contract to around 3.5%, we expect the economy to grow modestly in 4Q21 to around 2%. We project the ecoomy to grow around 3.0% to 3.5% for the full year 2021.

A. Key Highlights

• The adverse effects of MCO 3.0 extended into September. Although the headline IHS Markit Malaysia manufacturing Purchasing Managers’ Index (PMI) remained in the contraction region of below 50 for the fourth consecutive month, September’s reading improved to 48.1, the highest since June.

• The smaller contraction was due to reduced output volumes, new order inflows and export orders. But unemployment and supply chain remained disrupted, while prices stayed elevated for the sixteenth time.

B. Key Takeaways

• However, manufacturers are optimistic on the outlook. An increasing vaccination rate which had crossed 85% of adults and expected to reach 90% by October, a gradual reopening of the economy, steady global growth and trade, uptrend in the E&E cycle, firm commodity prices, support from resource-based manufacturing activities and stimulus measuresshould gradually lift up manufacturing activities.

• While we expect the economic performance for 3Q21 to contract to around 3.5%, we expect for the economy to grow modestly in 4Q21 to around 2%. We project the ecoomy to grow around 3.0% to 3.5% for the full year 2021.

Source: AmInvest Research - 4 Oct 2021