KUCHING: Manufacturing activities are expected to experience a strong drag and this will dampen the economic performance, analysts project in an economics report.
AmBank Research recalled that June’s manufacturing Purchasing Managers’ Index (PMI) fell to its lowest since April 2020 to 39.9 (51.3 in May) due to movement restriction policies to contain the pandemic.
“The impact from movement restrictions resulted in the sharpest slowdown in output and incoming orders since the peak of the initial outbreak of the pandemic in April 2020,” AmBank Research said.
“Domestic production was again affected by softer demand due to disrupted supply chains while new orders and exports shrank.
“Manufacturing activities are expected to experience headwinds until the restriction measures are relaxed. The restrictions would crimp production, new orders and exports.
“On an immediate note, manufacturing in July will remain under downwards pressure.”
According to AmBank Research, input costs will remain under upwards pressure.
The research firm noted that much of it will come from supply chain disruptions and higher raw material prices while production fell.
It further noted that challenges on the manufacturing operating environment will remain.
“In a nutshell, overall manufacturing activities are expected to experience a strong drag in July.
“This trend could continue if the current movement restriction remains.
“On that note, gross domestic product (GDP) for 2021 is projected at four per cent to 4.5 per cent. Nevertheless, the economy is less likely to fall into double-dip due to low base.”