• Malaysian manufacturing sector returns to expansion
• Global factory output falls for first time since June 2020 as supply conditions worsen
• Chinese PMI crashed as the Zero-COVID-19 policy weighs on supply and demand

Malaysian manufacturing sector returns to expansion

The Malaysian manufacturing sector reported a renewed increase in growth momentum at the start of the second quarter of 2022. The seasonally adjusted S&P Global Malaysia Manufacturing PMI rose from 49.6 in March to 51.6 in April, indicating a renewed improvement in the health of the sector. The uptick in the headline figure was led by a sharp recovery in new order volumes, with growth of new business hitting an eight-year high. Firms noted that stronger client confidence had boosted demand in both domestic and external markets. Concurrently, new export sales returned to expansion territory for the second time in three months, albeit only marginally. April data suggested that output was scaled back for the fourth month running. That said, the rate of moderation softened from March and was only mild. Firms commonly attributed muted production to difficulty sourcing and receiving inputs amid material shortages and delivery delays, as well as staffing shortages. Meanwhile, a fourth consecutive fall in employment levels was recorded, as Malaysian businesses continued to report difficulty obtaining foreign work permits for staff from abroad due to ongoing border restrictions. Longer lead times also meant businesses faced difficulties sourcing raw materials for production. Input costs increased for the twenty-third month running in April, reflecting higher raw material and transportation prices. The rate of inflation eased from March but remained marked overall. Manufacturers partially passed these higher costs to clients through higher output charges, which increased steeply once again. Looking ahead, Malaysian manufacturers remained optimistic regarding the year-ahead outlook for output amid hopes demand conditions would improve once the pandemic was under control globally. Expectations nevertheless dipped to an eightmonth low, mainly over concerns that price rises and material shortages could continue to hinder production levels.

Source: BIMB Securities Research - 5 May 2022