Malaysia’s manufacturing PMI falls in April, manufacturing conditions deteriorate sharply

The headline Nikkei Malaysia Manufacturing Purchasing Managers’ Index dropped from March’s 48.4 to 47.1 in April, the lowest in five months. The overall decline was also seen in all the five sub-components of the headline. Malaysia’s manufacturing sector’s operating conditions have sharply deteriorated since November 2015. The decline in output is mainly due to weak demand and unstable economic contributions. This year, new orders have also dropped sharply, resulting in steeper decline in production.

Moreover, external demand also weakened in April, with new exports orders growing just a tad. Manufacturers have laid off some of their staff, reversing the gains seen in March. Even though the job shedding was modest, the rate was faster than the average of 2016 so far, according to Markit.

Deterioration of new orders resulted in decreased pressure on manufacturing capacity. The contraction rate was the most rapid in almost two and a half years. Purchase of input fell at a noticeable rate. This was due to weak demand and reduced production requirements. Meanwhile, weaker MYR against the USD led to higher raw material costs, resulting in larger cost burdens in April.