● Manufacturing PMI fellfurther, registering at a 6-month lowin March (48.4; Feb: 48.5)

- Attributable to damaged demand and supply conditions, amid adoption of movement restrictions in various countries to combat the COVID-19 pandemic.

● Output index dipped to its lowest since June 2016

- Reflecting restricted operating capacity due to supply chain disruptions, as well as spillovers from lockdowns and cautious spending behaviour of consumers given heightened instability of income flow.

- In consequent, new orders declined to a record low, with a marked drop in export orders, especially from China.

● Degree of optimism plunged to its weakest since January 2016

- Pressured by concerns on a prolonged supply chain disruption, should countries fail to contain the spread of the pandemic in the near term.

- Given bleak demand outlook, firms reduced stockpiles with input purchases trending down at the fastest pace on record.

● Input cost softened to a three-month low

- Suppliers lowered input prices in effort to jack up demand, despite inflationary pressure from material shortages and weaker ringgit.

- Lower input cost was passed down to consumers, with output prices slashed for the third successive month.

● Plummeting manufacturing performance across the globe

- Eurozone (flash: 44.8; Feb: 49.2): dropped markedly to its lowest in 92 months, led by Italy, as business shutdowns weighed heavily on output and new orders.

- Singapore (27.7; Feb: 51.1): fell sharply to its lowest since the initiation of the survey eight years ago, as the tourism and export-dependent economy grappled with the outbreak.

● Manufacturing sector to dwindle in 2020 as a repercussion of the COVID-19 pandemic

- The economy is expected to remain gridlocked by tightened movement restrictions, hindering consumption activities and manufacturing production. With similar measures adopted across major trading partners, export orders would stand to endure further decline.

- As such, value-added manufacturing growth is projected to contract by 7.0% in 2020 (2019: +3.8%) in tandem with the expected decline in GDP (-1.9%; 2019: 4.3%).

Source: Kenanga Research - 2 Apr 2020