KUALA LUMPUR: Malaysia's Purchasing Managers Index (PMI) is expected to stay below the critical threshold of 50 points for the rest of the year, said Public Investment Bank Bhd (PublicInvest).
PublicInvest's projections for the manufacturing sector has also been revised with a lower growth rate of two per cent this year.
It noted that Malaysia's latest reading of 47.8 points hinted a sustained slowdown in business conditions that was broadly in line with that seen on average over the second quarter (Q2) of 2023.
"Given the multifaceted and volatile nature of the manufacturing industry, we adopt a circumspect and cautious stance with respect to its immediate future.
"Our apprehension is founded on a confluence of factors that predispose the industry to significant downside risks. These factors include inflationary pressures, which are still above the pre-pandemic levels, the impact of interest rates, and persisting geopolitical conflicts.
"Therefore, we maintain that the trajectory of Malaysia's PMI will remain consistent with the trend of the global PMI, and as such, we project that it will continue to languish below the 50-point mark for the rest of the year," it said in a note.
It added that order books were significantly downsized, reaching their most substantial contraction in six months amid persistent client apprehension.
Although an improved supply chain environment has been beneficial for operations, there were indications of increasing inflationary pressures due to a sustained acceleration in average cost burdens.
"In the foreseeable future, the domestic manufacturing sector exhibits sanguine expectations as corroborated by the unprecedented twenty-fifth sequential month of sanguinity concerning forthcoming output.
"It is pertinent to acknowledge, however, that prevailing sentiment manifests a palpable restraint, cascading into its nadir in the prevailing sequence of optimism," it noted.
It added that the outlook for businesses was bleak, as companies contend with dwindling orders, both domestically and internationally.
The business sentiment index continued to remain below the crucial 100-point threshold, at 95.4 in Q1 2023 from 85.9 in Q4 2022.
"Therefore, we foresee a parallel trajectory between Malaysia's PMI and the broader global PMI, with the former projected to consistently register below the critical expansion threshold of 50 points for the remaining of the year," it added.
Source: https://www.nst.com.my/business/2023/08/937835/malaysias-pmi-may-stay-below-critical-threshold-publicinvest