KUALA LUMPUR, Nov 1 — The Malaysian manufacturing sector last month recorded the strongest expansion in new orders since April and the first rise in production in six months, according to the latest IHS Markit data.

Its headline Malaysia Manufacturing Purchasing Managers’ Index (PMI), a composite single-figure indicator of the manufacturing performance, soared to 52.2 in October 2021 from 48.1 in September 2021, the information and analytics firm said.

The country’s manufacturing sector saw growth return at the start of the fourth quarter (Q4) of 2021 following the lifting of Covid-19 restrictions, it said in a statement today.

"That said, manufacturers commonly noted that sustained supply chain disruptions and delivery delays had held back a stronger recovery, while material and container shortages led to a sharp acceleration in cost inflation.

"As a result, firms increased their output charges at the quickest pace since April,” it said.

Despite the rise in output and new orders, businesses reported that purchasing activity remained subdued at the start of Q4. 

"While the latest fall was only modest, input purchases have now reduced in each of the last five months,” it said.

IHS Markit added that firms commented that demand was only returning gradually, as well as mentioning difficulties in receiving raw materials. At the same time, manufacturers utilised existing stocks of pre- and post-production goods to fulfil incoming orders, often as a result of delivery delays. 

"This occurred as supplier delivery times lengthened to the greatest extent in five months,” it said.

On foreign demand, it said demand for Malaysian manufactured goods remained subdued in October 2021, though the pace of reduction in export sales was the softest since May as firms noted pockets of stronger demand in Europe and the United States

In terms of job rate, it said the employment levels fell marginally in October, mainly due to firms reporting a lack of available staff.

Commenting on October’s performance, chief business economist Chris Williamson said while looser virus containment measures were helping drive demand higher, supply had yet to catch up, with companies again reporting widespread issues with component shortages, shipping delays and a lack of containers, all of which colluded to drive prices up at an increased rate in October. 

"Supply and demand clearly remain out of balance, and will do so for some time to come, acting as a constraint on growth and putting upward pressure on prices,” he said.

Moving forward, IHS Markit pointed out that manufacturers maintained an optimistic outlook for activity over the coming 12 months.

"Malaysian manufacturers expressed optimism regarding the year-ahead outlook for the fourth month running in October.

"While softer than that seen in September, positive sentiment was in line with the long-run average, underpinned by hopes of a domestic and external recovery in demand should the pandemic continue to dissipate,” it said. — Bernama