The Malaysian manufacturing sector recorded its sixth consecutive month of contraction, with the S&P Global Manufacturing PMI falling to 49.2, the lowest reading in seven months, according to MIDF Amanah Investment Bank Bhd (MIDF Research).
Key Highlights
Sector Weaknesses
- New Orders: Experienced the sharpest decline in seven months, reflecting weak domestic demand.
- Output and Inventory Levels: Declined further, indicating broad-based challenges.
- Backlogs of Work: Stabilized, reaching a four-month high, due to limited production capacity.
Export and Supply Chain Trends
- Export Orders: Showed growth, likely driven by rising demand in the Asia-Pacific region.
- Supply Chain Disruptions: Persisted for the seventh consecutive month, worsened by the Red Sea crisis, causing longer delivery times.
Cost Pressures
- Higher Commodity Prices and the weaker ringgit drove up costs, though input price inflation eased to a nine-month low.
Employment and Business Confidence
- Employment Levels: Remained stable despite the challenges.
- Business Confidence: Stayed solid but below long-term averages, reflecting cautious sentiment regarding domestic demand recovery.
Outlook for the Sector
- Sluggish Domestic Demand: Continues to weigh on overall performance.
- External Demand: Improved export orders provide a silver lining, with rising demand across the region offering some support.
- Optimistic Recovery: Analysts anticipate growth in production activities as export demand strengthens.
Analyst Takeaway
The manufacturing sector is navigating a challenging mix of domestic and global pressures, including:
- Muted local demand.
- Elevated raw material prices.
- Global supply chain disruptions.
However, export demand recovery could help offset some of these headwinds, offering hope for a gradual improvement in the coming months. Manufacturers remain cautious but resilient as they adapt to ongoing uncertainties.
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