• Manufacturing sales value declined by 2.0% YoY

• Steady growth in the sales value of both export and domestic oriented

• Manufacturing sector employment increased by 2.5% YoY

• Productivity decreased by 4.4% YoY in April

• Downbeat manufacturing outlook

The sales value of the manufacturing sector declined by 2.0% YoY to register RM145.0bn in April after registering a positive growth of 8.0% YoY in March, the first year-on-year contraction since May 2020. The year-on-year decrement in April was influenced by the deterioration in food, beverages & tobacco (Apr: -12.7%; Mar: +5.5%); transport equipment & other manufactures (Apr: -4.9%, Mar: +14.6%); and petroleum, chemical, rubber & plastics (Apr: -3.1%; Mar: +4.8%) subsectors.

On a month-on-month comparison, the sales value contracted 7.2% as against an increase of 7.6% registered in March while seasonally adjusted sales value shrank 5.8%.

The sales value of export-oriented industries which accounted for 71.5% of total sales recorded a decrease of 3.4% YoY in April after registering positive momentum since May 2020. The contraction was weighed down mainly by the manufacture of vegetable & animal oils & fats (-23.2%); manufacture of rubber products (-14.2%); and manufacture of plastics products (-7.1%) industries. Nonetheless, the domestic-oriented industries maintained a positive trend with a growth of 1.6% YoY in April, albeit at a slower pace as against 10.7% registered in March. The positive momentum in the domestic-oriented industries was primarily underpinned by the manufacture of fabricated metal products, except machinery & equipment (5.5%); manufacture of other non-metallic mineral products (4.6%); and manufacture of food processing products (3.4%) industries. In comparison to the previous month, both export and domestic-oriented industries lessen by 7.2% respectively.

Employment in manufacturing sector continue albeit at slower pace. There were 2.35mn persons engaged in the manufacturing sector in April, which increased by 2.5% YoY as against 2.29mn persons registered a year ago. The increase was supported mainly by the food, beverages & tobacco products (5.6%); electrical & electronic products (4.2%); and wood, furniture, paper products & printing (2.7%) sub-sectors. The number of persons engaged in these three sub-sectors encompasses more than half of the total employees in the manufacturing sector. As compared to the preceding month, the number of employees in this sector edged down by 0.1%.

In tandem with the addition in the number of employees, the salaries & wages paid in the manufacturing sector went up by 3.9% YoY or RM302.2mn to RM8.02bn in April. In a month-on-month comparison, the salaries & wages declined by 1.9% or RM153.0mn from RM8.17bn. The average monthly salaries & wages per employee were higher by 1.4% YoY as compared to a year ago with a value of RM3,413. Nonetheless, average salaries & wages paid per employee fell by 1.8% as compared to the preceding month.

Meanwhile, the sales value per employee or productivity in April decreased by 4.4% YoY to RM61,716 as compared to RM64,562 in the same month of the previous year. Similarly, the average sales value per employee dropped 7.1% as compared to March 2023.

Slower manufacturing sector sales value. Overall performance for January to April 2023, the sales value of the manufacturing sector rose by 5.5% YoY, to register RM594.4bn. Meanwhile, the number of employees added by 2.5% to record a total of 2.35mn persons with salaries & wages grew by 4.2% to RM32.5bn. Furthermore, sales value per employee registered a growth of 2.9%, amounting to RM253,029 for the first four months of 2023.

Outlook

Malaysia’s manufacturing sales contracted in April, affirming the weak manufacturing outlook. The sales value of the manufacturing sector fell by 2.0% YoY (-7.2% MoM), the lowest since May 2020. The latest print continues to affirm our downbeat manufacturing outlook as guided by recent information flow. Malaysia Manufacturing PMI fell to a four month low in May (47.8; Apr: 48.8). The latest PMI reading also indicates that the manufacturing sector remained in contraction for nine consecutive months or since September 2022. This is largely attributable to weakness in demand conditions in line with the downtrend recorded in the external trade. Weak demand conditions led to a further slowdown in output production which eased for a tenth straight month and at the fastest pace since January 2023. New orders moderated for the ninth straight month and the steepest slowdown in three months. Similarly, new export orders eased in May in line with global economic slowdown. This weakness was reflected in industrial production index (IPI) which contracted by 3.3% YoY in April. The manufacturing sector output dropped by 3.0% YoY, its first contraction since July 2021, mainly influenced by the decline of 3.5% YoY in export-oriented industries (Mar: +3.6%). In addition, the contraction of export-oriented industries in April was the first recorded in 34 months. As a result. sales value of export-oriented industries recorded a decrease of 3.4% YoY after registering 7.3% YoY growth in March. Meanwhile, exports declined for a second straight month and the most since May 2020 by 17.4% YoY in April (Mar: -1.4%). Overseas shipments of manufactured goods fell for a second consecutive month by 15.5% YoY (Mar: -0.5%), marking the worst performance since May 2020 and the longest streak of contraction since March 2020.

Downside risks remain given the uncertain global economic outlook and the potential for exports to weaken. We still expect growth to remain moderate in the coming months, due to the normalisation of economic activities, and the waning effect of the lower base recorded last year. Overall, growth momentum in both manufacturing production and manufacturing sales value is expected to stay soft, amid its cautious outlook on the manufacturing sector and trade performance. However, we still expect an upturn in the manufacturing conditions by end of the year as external demand is expected to improve, mainly backed by a steady rebound in the E&E sector and as the global economy recovers. We also still expect the resilience in domestic spending will help to cushion the impacts of external slowdown.

Source: BIMB Securities Research - 12 Jun 2023