THE manufacturing economy deteriorated for a fifth successive month in February, with a continued decline in both output and new orders, said economists.

The Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) – a composite single-figure indicator of manufacturing performance – dipped to 47.6 points last month from 47.9 in January, pointing to a sharp deterioration in the sector’s business conditions.

A PMI of more than 50 points represents expansion in the manufacturing sector, and below that, contraction.

In a statement today, the London-based IHS Markit said the latest data extended the current downturn in the goods-producing economy to five months.

“February data pointed to a sustained contraction of Malaysia’s manufacturing economy, reflecting further falls in production and sales,” said IHS Markit economist Joe Hayes.

“Intakes of new work fell in February, with firms attributing this to a general market slowdown, causing existing client demand to decline.”

He said new orders decreased at one of the strongest rates across the survey’s history, as manufacturers reported unfavourable demand.

“Near-term manufacturing prospects appear downbeat, as firms opted to leave workforce numbers unchanged, scaled back input buying sharply and reduced inventories, suggesting that firms are bracing themselves for continued production cutbacks.”

Earlier this week, the Business Conditions Survey revealed that the introduction of the sales and services tax last year pushed up by 10% the cost of doing business for most Malaysian manufacturers.

Some 85% of manufacturers surveyed said they experienced a rise in production costs.

While there was a pick-up in sales in the second half of 2018, the local sales index remained below the 100-point confidence threshold, meaning that domestic sales grew slower than export sales. – March 1, 2019.