• Malaysia’s manufacturing PMI turns to contraction

• Global manufacturing PMI at nine-month high in January

• US ISM manufacturing surged back into positive growth territory

• Eurozone manufacturing sector contracts, but at slowest rate

• UK manufacturing sector stabilises as political uncertainty subsides

• China’s manufacturing PMI slips in January

• Japan’s manufacturing weakness persists into 2020

• ASEAN manufacturing sectors deteriorate slightly in January

Malaysia’s manufacturing PMI turns to contraction

The pick-up in the Malaysian manufacturing sector seen since last September lost some momentum during January. The IHS Markit manufacturing PMI recorded 48.8 in January, down from 50.0 in the previous month. A hindrance to Malaysia's manufacturing sector in January was export markets, which declined during January for the first time in three months. Some respondents reported an ongoing tough global trading environment at the start of the year. As a result, total order book volumes were adversely impacted to the greatest extent since September. Survey data showed a slight drop in staffing numbers in January with firms mainly linked this to voluntary leavers and already-sufficient employee counts. Some companies also reported increased efforts to contain costs. There were meanwhile diverging trends regarding prices in January. Input cost pressures intensified, with the rate of increase hitting a five-month high. Increased import prices, material shortages and suppliers ramping up their charges were mentioned by firms. However, greater operating expenses were primarily absorbed as output charges declined fractionally in January. Nevertheless, companies remained strongly optimistic towards output volumes over the coming 12 months, suggesting firms expect the current loss of pace to be temporary. According to anecdotal evidence, forecasts of stronger demand, supportive state policies and planned expansion into foreign markets following 'phase one' of the US-China trade deal were mentioned as positive factors.

Outlook. Having ended 2019 with their best performance for over a year, Malaysia’s manufacturers started 2020 on a softer footing. Much of the renewed weakness was a function of deteriorating external demand, with export orders under further pressure as a result of slower growth in key trading partners. Analysis of comparable historical official data on Malaysian manufacturing suggests that, at current levels, the survey’s output index is consistent with annual production growth of just under 5%, which represents a moderation when compared to December (5.5%). The past four months have seen the strongest PMI readings since 2018, which corresponds with an easing of global trade tensions in recent months. Trade war developments will likely therefore play a major role in determining Malaysia’s export environment in coming months. The Wuhan coronavirus could pose as a key downside risk to the near-term economic outlook, albeit growth momentum could recover quickly if the epidemic ends rapidly.

Global manufacturing PMI at nine-month high in January

The performance of the global manufacturing sector showed a further incremental improvement at the start of 2020. The J.P.Morgan Global Manufacturing PMI rose to a ninemonth high of 50.4 in January, slightly above the 50.1 posted in December. Sector PMI data indicated that the upturn was confined to the consumer and intermediate goods industries. Business conditions at consumer goods producers improved at the fastest pace for nine months, while the intermediate goods PMI signalled growth for the first time since December 2018. The downturn at investment goods producers continued, as output and new order inflows contracted further. Global manufacturing output rose for the sixth successive month in January, underpinned for a fourth consecutive expansion of new orders. International trade volumes declined for the seventeenth month running, despite moving closer to stabilising.

Source: BIMB Securities Research - 4 Feb 2020