IHS Markit: Strong June manufacturing rebound suggests Malaysia in for V-shaped recovery

Justin Ong
In the IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) for June, the country registered a score of 51.0, up sharply from the 45.6 in May. — Picture by Sayuti Zainudin

KUALA LUMPUR, July 1 — The local manufacturing sector recovered sharply in June and returned to a level last seen in September 2018 to suggest Malaysia might see a quick snapback from the Covid-19 pandemic, according to IHS Markit.

In the IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) for June, the country registered a score of 51.0, up sharply from the 45.6 in May.

A PMI score under 50 denotes contraction while a score above 50 signals expansion.

“The Malaysian manufacturing sector showed encouraging signs of recovery in June,” Chris Williamson, chief business economist at IHS Markit, said.

“Such a rapid turnaround in production since the severe collapse in April bodes well for a V-shaped recovery.”

IHS Markit said respondents cited the government’s decision to lift restrictions on some manufacturing sectors during the movement control order (MCO)  as contributing to the sharp increase, as this both allowed customers to reorder and factories to clear production backlogs.

Demand also began showing signs of stabilising last month, with IHS Markit noting the New Orders Index rose to a six-month high.

However, international demand that began falling in April remained subdued.

Businesses were also reporting increased confidence in their operations, returning to levels just prior to the introduction of the MCO in March.

Despite the indications, however, Williamson cautioned against taking the current recovery as sustained and said it could easily be derailed.

Among others, he pointed out that business confidence — while improved — was still not back to levels from the very start of the year, before Covid-19 erupted into a world-stopping pandemic.

“For now though, the data are moving strongly in the right direction and, barring any second waves of infections, a recovery is evident.”

Covid-19 levels in Malaysia have fallen off sharply in recent days, with just two new cases reported yesterday and only 164 active cases still remaining.

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