KUALA LUMPUR: Kenanga Research has maintained its outlook for the manufacturing activity to remain on a recovery path as the country transitioned to the endemic phase, despite the stagnant performance in May.

       Malaysia’s manufacturing purchasing managers’ index (PMI) slowed to 50.1 in May 2022 from 51.6 in April – a two-month low.

       “Nevertheless, our growth projection remains susceptible to several downside risks, primarily linked to China’s zero-Covid policy and the Russia-Ukraine crisis, which have led to global supply disruptions and fuelled global inflation amid elevated commodity prices.

       “However, the adverse effect is expected to be mitigated by various policy support, as well as Malaysia’s export diversification and robust demand from key trading partners. Against this backdrop, we maintain our 2022 gross domestic product growth forecast of between 5% and 5.5%,” it said in a note yesterday.

       On the latest PMI, MIDF Research said manufacturing sector activities were broadly unchanged from the previous month as the manufacturing PMI dropped to 50.1, mainly due to weaker new orders.

       It said manufacturers had indicated that rising prices and supply shortages were the factors which dampened demand and their productive capacity.

       In view of the slowing demand, they had scaled back production volume for the fifth consecutive month.

       Consequently, it said manufacturing employment also moderated amid continued challenges in hiring foreign workers.

       Meanwhile, MIDF highlighted that disruptions in the supply chain also affected goods-producing firms, with the renewed lockdowns in China adding to the shortages of raw materials and limited freight capacity.

       “Price pressures also continued to affect local manufactures as supply constraints led to higher input costs, and firms have no choice but to increase selling prices,” it said.

       On positive note, the research house pointed out that manufacturers expected the outlook to improve with easing restrictions and the end of the pandemic to lead to higher demand and supply conditions. — Bernama