KUALA LUMPUR: The seasonally adjusted S&P Global Malaysia manufacturing purchasing managers’ index (PMI) declined to 48.4 in March from 49.5 in February to 48.4, signalling a slight moderation in the health of the sector.
According to S&P Global, the historical relationship between the PMI and official gross domestic product (GDP) data indicates that the first quarter of 2024 will likely see continued growth, while the data are also consistent with a slight improvement in official manufacturing production on an annual basis.
“Malaysian manufacturers remained under pressure in March, as the latest PMI data signalled that the sector sank slightly deeper into moderation, following positive signs at the start of 2024. New orders, output and employment were all scaled back to a greater extent, and at the most pronounced rates in the year-to-date,” S&P Global Market Intelligence economist Usamah Bhatti said in a statement.
“The muted demand environment meanwhile allowed for a supplier improvement, as delivery times shortened to the greatest extent in ten months. Meanwhile, despite another slight pick-up in input price inflation, prices charged for Malaysian manufactured goods were unchanged as some firms lowered output prices in an attempt to stimulate sales.
"Firms remained hopeful of an eventual improvement over the coming year, though concerns were raised about how long the current demand weakness would persist for. As a result, business optimism faltered to a seven-month low,” he said.
S&P Global said new orders eased for the nineteenth month running in March amid weak demand. The reduction quickened from that seen in February and was the most pronounced in 2024 so far.
Muted demand was also reported in international markets, where sales moderated for an eleventh consecutive month.
Following the trend in new orders, production experienced its most significant softening in three months, showing a solid overall reduction rate.
Concurrently, employment was scaled back for the third consecutive month in March. While the rate of job shedding was only marginal, it was the steepest seen in four months as firms reduced headcounts in line with capacity requirements.
In addition, purchasing activity, stocks of inputs and inventories of finished goods were all scaled back at the end of the first quarter, with only stocks of purchases seeing the rate of moderation ease on the month
Companies, however, experienced shorter delivery times for the second time in three months in March. Although the improvement rate was marginal, it was the most significant since May 2023, attributed to reduced pressure on suppliers due to subdued demand.
S&P Global noted that the rate of input cost inflation ticked up to a three-month high amid currency weakness and higher prices for raw materials globally.
The rate of inflation remained softer than the series average, however. On the other hand, prices charged for manufactured goods were unchanged from February, ending a seven-month sequence of inflation.
Hopes of a stronger improvement in demand were key to optimism regarding the 12-month outlook for output at the end of the first quarter.
“The overall level of confidence eased to the softest since last August, however, as manufacturers highlighted concerns regarding the timing of a hoped-for recovery in demand,” it said.
