Malaysia’s manufacturing sector on the mend, says S&P Global
KUALA LUMPUR: Malaysia's manufacturing sector shows signs of a milder downturn in the second quarter, according to S&P Global Market Intelligence.
Despite continued subdued demand, manufacturers were showing tentative signs of improvement with production cutbacks slowing and decline in new orders easing, it added.
Moreover, employment levels stabilised last month, ending a three-month sequence of job shedding.
Input price inflation was littlechanged and contributed to a renewed increase in output prices, although the rate of charge inflation was only marginal.
The seasonally adjusted S&P Global Malaysia manufacturing Purchasing Managers’ Index (PMI) rose to 49.0 last month, up from 48.4 in March, to indicate a softer downturn in the Malaysian manufacturing sector.
The latest PMI data suggest that gross domestic product growth is running at a slightly improved rate than that seen at the end of 2023, as well as pointing to modest year-on-year improvements in official manufacturing production data.
“Manufacturers often noted that demand remained muted during April, with reports of weak customer confidence.
“Total new business moderated for the 20th consecutive month, though the rate of reduction eased from March. However, demand conditions in international markets improved for the first time in a year and at the strongest rate since April 2021,” it added.
With customer demand remaining broadly subdued, manufacturers scaled back production for the 21st month in a row.
“That said, the moderation eased from March and was only mild. At the same time, stocks of finished goods were wound down further, as firms used existing stocks to fulfil orders.”
S&P added that as market conditions showed some signs of recovery, Malaysian manufacturers reported stable employment levels in April following three consecutive monthly falls.
S&P economist Usamah Bhatti, said despite the latest PMI data suggesting that demand conditions in the manufacturing sector remained muted at the start of the second quarter, the data appeared to be consistent with modest growth in the official statistics.
“Evidence is pointing to demand conditions moving on an upward trajectory, given the softer moderations in production, new business and purchasing.
“Better still, manufacturers will be buoyed by the renewed expansion in new export sales, with the rate of growth the strongest recorded in three years.”
Bhatti added that the outlook on output for the coming year also remained positive in April, although the overall degree of confidence waned to the lowest in eight months.
“Firms often mentioned that they remained unsure regarding the timing and speed of any demand recovery, with downside risks centred around a muted global economy,” said Bhatti.