PETALING JAYA: The manufacturing sector remained weak halfway through the third quarter of this year (Q3 2023) and this has been attributed to a combination of lacklustre demand and increase in production cost.
S&P Global Market Intelligence said that as a result of these developments, companies were prompted to curtail production.
The purchasing manager’s index (PMI) for August was 47.8, unchanged from the previous month. The index was at 47.7 in June.
The PMI shows whether the market is expanding or contracting based on the views of purchasing managers.
Furthermore, the input price inflation rose for the fifth month in a row, reaching the highest point since November last year.
Collectively, S&P said, these factors forced businesses to shrink their workforce substantially to shed excess capacity to cut costs.
However, S&P economist Usamah Bhatti noted that while the manufacturing PMI data showed that demand remained muted, official statistics revealed that there was modest growth.
“Having said that, the evidence shows that demand will remain subdued in the coming months as growth in production and new business inflows remain moderate,” he said.
Usamah said the PMI reading showed that GDP growth was aligned with what was seen in the second quarter of the year.
Consequently, the growth in new business also moderated for the 12th month in a row, although it was less pronounced in July.
Similar trend seen in global demand
A similar trend prevailed at the global level as new export orders declined for the fourth consecutive month.
Customer demand also remained muted, forcing manufacturers to scale back production, maintaining a pattern observed over 13 months.
However, the moderation remained steady from the previous survey period.
On a parallel trend, stocks of finished goods declined at the fastest pace since July 2021, as firms used existing stocks to fulfil orders. - FMT
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