Stronger Improvement In Manufacturing Conditions In July

Improved conditions also lifted business confidence surrounding the 12-month outlook for activity during July with the level of optimism strengthening to a five-month high.

Stronger Improvement In Manufacturing Conditions In July

Business conditions are improving but remains tough with firms struggling against headwinds of falling export demand, supply constraints and rising prices.

This is what Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said on current state of global manufacturing.

"Business conditions are improving yet remain tough, with firms struggling against headwinds of falling export demand, persistent supply constraints and rising prices. However, July saw the best expansion in output so far this year, in part reflecting the gradual revival of manufacturing as the worst of the pandemic impact fades.

"Looking at the historical relationship between the PMI and official statistics, the latest reading signalled that industrial production is now increasing gradually after broadly stagnating throughout the first half of 2022, to hint at an encouraging start to economic growth in the third quarter.

"A major uncertainty remains the path of global demand, as recession risks have intensified in the US and Europe, which could severely limit any export- derived growth."  says Williamson.

Surat terbuka kepada PM Dari Gabungan Pengilang Tembakau Malaysia
Rang Undang-Undang itu mempengaruhi kesaksamaan di kalangan rakyatnya. Berdasarkan dasar tersebut, individu yang lahir pada Disember 2006 dan individu yang lahir pada Januari 2007 akan menerima undang-undang yang berbeza secara sah.

Malaysian manufacturing

Malaysian manufacturers reported a further improvement in operating conditions at the start of the third quarter of 2022. Output volumes returned to growth territory for the first time in seven months amid the strongest rise in new orders since April, albeit with rates of growth subdued.

Manufacturers also reported a further reduction in capacity pressure at the start of the third quarter, as evidenced by a second successive decline in backlogs of work.

Firms often attributed stronger demand conditions to improved client confidence. In fact, input price inflation rose at the softest rate since last September as the price of some raw materials fell, notably metals.

Improved conditions also lifted business confidence surrounding the 12-month outlook for activity during July with the level of optimism strengthening to a five-month high.

The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers’ IndexTM (PMI) rose from 50.4 in June to 50.6 in July. The latest reading pointed to a marginal improvement in the health of the sector that was nonetheless the strongest reported since April, says the S&P Global Market Intelligence report.

The headline PMI was buoyed by a renewed rise in production levels during July. Though only slight, the expansion was the first since December 2021. Companies reported that increased new orders helped boost output.

That said, some firms commented that raw material prices remained elevated and supply constraints persisted, holding back a stronger recovery.

Nestlé: Continuing cost pressure
Nestle’s long term prospect are favorable underpinned by its strong balance sheet, which could provide cushion towards potential economy downturn

Recovery

New order inflows increased at a quicker rate in the latest survey period, extending the current period of growth to four months. The rate of growth was the strongest since April, albeit only marginal, and was attributed to improved client confidence.

On the other hand, new export orders declined for the first time since March and at the quickest pace for ten months amid global supply chain issues and subdued overseas demand.

Input costs increased further in July, reflecting higher prices for a range of raw materials and freight costs. The overall rate of inflation eased to the lowest for ten months however as some firms reported lower costs for metals and other commodities.

Manufacturers sought to partially pass higher costs to clients by raising output charges. In line with the 80 trend for input prices, factory gate inflation eased to the 70 softest since February.

Shortages of raw materials and improved demand conditions 50 led to firms increasing their purchases of raw materials and other inputs for the first time in three months.

At the 40 same time, stocks of purchases stagnated as firms utilised 30 increased purchases to fulfil orders amid delays in receiving 20 shipments. Supplier delivery times lengthened at a solid pace in July, though the deterioration was softer than the average seen over the current 32-month period of deterioration to Sources: S&P Global, Department of Statistics Malaysia. hint at some easing of supply constraints.

Decline in backlogs

Malaysian manufacturers reported a further reduction in capacity pressure at the start of the third quarter, as evidenced by a second successive decline in backlogs of work. At the same time, businesses reported that workforce numbers were scaled back for the sixth successive month, though the rate of job shedding was only marginal.

Looking ahead, manufacturers displayed stronger optimism regarding the outlook for output over the coming year. The overall degree of sentiment improved to the highest since February amid hopes of a stronger recovery in demand once price and supply pressures ease following the lifting of pandemic restrictions.