Malaysia’s manufacturing PMI remains subdued

KUALA LUMPUR: Malaysia’s manufacturing sector continued to face challenging business conditions in April 2023, with the seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) unchanged at 48.8 in April, according to S&P Global.

That said, the index was at its joint-highest level since September last year, suggesting a tentative recovery in operating conditions since the turn of the year.

S&P Global said the latest PMI reading suggested that gross domestic product (GDP) growth is running at a similar level to that seen in the final quarter of 2022, as well as modest year-on-year improvements in official industrial production data.

S&P Global Market Intelligence economic director Andrew Harker said: “While the latest PMI data suggest that demand conditions remained subdued in the Malaysian manufacturing sector in April, the data are still consistent with reasonable growth in official numbers.”

“Moreover, there were some positive signs emanating from the latest survey. Export demand ticked up, hopefully providing an early signal that the overall demand environment will start to strengthen soon. Firms also had more success in securing new staff members during the month.

“With price and supply pressures also having shown improvement, the sector is hopefully set for a strengthening of growth momentum as the quarter progresses,” he said.

S&P Global said the latest data signalled mixed trends across the Malaysian manufacturing sector at the start of the second quarter of the year.

Demand generally remained subdued, leading firms to limit production and scale back their purchasing activity, although there were some positive signs with regards to new export orders.

With customer demand remaining subdued, manufacturers scaled back production, the ninth month running in which this has been the case. That said, the moderation was only slight and the least pronounced since August 2022.

Meanwhile, stocks of finished goods decreased amid the delivery of orders or their collection by customers.

Companies reported success in securing additional staff members in April. As a result, employment increased for the fourth successive month.

The rate of job creation was modest, but quickened to a seven-month high. Higher workforce numbers, alongside subdued new orders, meant that firms were able to deplete backlogs of work again during the month.

In contrast to the trend in employment, purchasing activity continued to be scaled back as the muted picture for new business deterred firms from buying additional inputs. In turn, stocks of purchases also decreased, S&P said.

It noted that there were further signs of raw material prices levelling off in April as input costs rose only slightly. The rate of inflation was broadly in line with the 34-month low posted in March.

With cost inflation muted, firms were able to offer discounts to customers to help provide a boost to demand. Selling prices ticked lower, ending a three-month sequence of inflation.

“Hopes that new orders will return to growth supported confidence that production will rise over the next 12 months. That said, the current subdued demand environment meant that optimism dipped to a four-month low at the start of the second quarter,” S&P said.

Source: https://www.thestar.com.my/business/business-news/2023/05/02/malaysias-manufacturing-pmi-remains-subdued