Malaysia's manufacturing PMI likely to remain consistent with global trend - PublicInvest Research

Malaysia's manufacturing purchasing managers index (PMI) is expected to remain consistent with the trend of the global PMI, given the multifaceted and volatile nature of the manufacturing industry, said PublicInvest Research.

In an Economic Update note, it noted that its apprehension is founded on a confluence of factors that predispose the industry to significant downside risks.

These factors include inflationary pressures, which are currently at elevated levels, the impact of ongoing interest rates and persisting geopolitical conflicts.

“Therefore, we project that Malaysia's PMI will continue to languish below the 50-point mark, extending into at least the third quarter of 2023.

“However, our projection suggests that the manufacturing industry as a whole will still experience a commendable 4.4% expansion in 2023,” it said.

Meanwhile, MIDF Research anticipated Malaysia's external trade performance in the second quarter of 2023 to continue a contraction, as reflected in the S&P PMI readings.

In a research note, it said the poor business sentiment would add more downward pressure on the ringgit, on top of the US debt ceiling talks and possible extension of rate hikes by the US Federal Reserve.

“However, we foresee the current depreciation of the ringgit as only temporary, and the currency shall regain its footing once the fiscal and monetary matters in the US settle down.

"The rebound of manufacturing PMI figures of Japan and China as well as continued optimism about the Indian economy may boost regional trade demand in Asia, which will benefit Asean and Malaysia," MIDF Research said.

Factory PMI readings rebounded to an expansion path at 50.6 in Japan, and 50.9 in China in May 2023.

For the second half of 2023, the research firm expects Malaysia’s external trade performance to record a smaller contraction, while the ringgit is expected to return to an appreciation path.

Meanwhile, domestic demand in Malaysia is predicted to remain resilient amid softer inflationary pressure, an improving labour market, the revival of tourism activities and supportive economic policies.

On 1st June, S&P Global Market Intelligence said the seasonally adjusted S&P Global Malaysia PMI was recorded at 47.8 in May, down from 48.8 in April.

However, delivery times from suppliers improved and were shortened. The sentiment was highlighted as the lowest since June 2022.

Among regional countries, contraction patterns of manufacturing PMI figures were observed in Vietnam (45.3), and South Korea (48.5).