• Malaysia manufacturing sector picks up steam in December
• Global manufacturing upturn continues at end of 2021
• Sector remained beset by price inflationary and supply chain pressures
• The hit from Omicron to output appears to be modest
• Asian factory activity grew in December
• Supply constraints, rising costs cloud outlook

Malaysia manufacturing sector picks up steam in December

The manufacturing sector in Malaysia continued to expand in December, and at a faster pace. The headline IHS Markit Malaysia Manufacturing PMI rose from 52.3 in November to 52.8 in December, indicating a stronger improvement in the health of the sector.

The further easing of COVID-19 restrictions alleviated pressures faced by the Malaysian manufacturing sector and provided momentum to growth in December. The average reading of the headline PMI in the fourth quarter was the strongest quarterly performance recorded since the survey began in July 2012, as output and new order growth reached eight-month highs respectively. December data suggested that output rose for the third month running. The pace of expansion was moderate and was the quickest since April. New order volumes also increased at the end of the year, with the rate of growth reaching an eight-month high. Stronger client confidence had boosted demand in both domestic and external markets. Concurrently, new export sales returned to expansion territory in December, as stronger demand in the US and China contributed to a fractional rise in new business from abroad. Operating conditions remain tough nonetheless, with supply chain delays as well as material labour shortages widely reported across the sector. Input costs increased for the nineteenth month running in December, reflecting higher prices for raw materials and transportation. The rate of inflation quickened to a seven-month high. Encouragingly, business expectations for the coming year remained strong overall. Malaysian manufacturers remained optimistic regarding the year-ahead outlook for output. Optimism was underpinned by hopes that the pandemic would subside and induce a broad recovery in supply chains and the economy.

Source: BIMB Securities Research - 5 Jan 2022