KUALA LUMPUR: The seasonally adjusted S&P Global Malaysia manufacturing purchasing managers’ index (PMI) dipped to 49.5 in September from 49.7 in August, indicating a continued, though slight, weakening in the health of the manufacturing sector.
Operating conditions have now shown moderation for four consecutive months.
“The latest PMI data revealed that business conditions in the Malaysian manufacturing sector were muted at the end of the third quarter of 2024 as production levels were scaled back at a quicker pace in the midst of broadly stagnant new orders. That said, the rate of reduction in output was only modest while demand edged closer to stabilisation. As such, the data indicated that GDP growth in Q3 continued at a similar trajectory to that seen in the second quarter,” S&P Global Market Intelligence economist Usamah Bhatti said in a report.
He said it was also encouraging to see employment conditions improve, as manufacturers acquired more staff in preparation for a purported demand recovery.
“Furthermore, while the expansion was accompanied by rising inflation, the respective rates of increase were subdued in comparison to the levels seen over the past three years.
"Sentiment stayed positive, with firms expecting higher output in the coming year. Moreover, the degree of confidence strengthened to the highest since January amid hopes of improved demand conditions,” Bhatti said.
According to S&P, production levels were subdued in the latest survey month, with the respective seasonally adjusted index remaining below the neutral 50.0 mark. Output has now been scaled back for four months in succession, with the latest moderation the most pronounced since March.
Total new orders declined for the third consecutive month in September, but the reduction was only slight. Companies cited weak client confidence due to domestic economic issues, although overseas demand remained strong. As such, new export orders increased for the sixth month in a row, driven by higher demand from Southeast Asia.
Malaysian manufacturers reported a slight increase in employment levels in September, marking the first rise since May as new orders approached stabilisation. This larger workforce helped firms to reduce backlogs of work slightly during the latest survey period, S&P said.
S&P noted that purchasing levels were scaled back at the end of the third
quarter. The pace of reduction quickened from August to the fastest since March amid subdued production requirements.
As a result, firms remained cautious with their inventory holdings as stocks of both purchases and finished items were lowered in September.
Manufacturers also commented that delivery delays and high raw material prices had weighed on input buying in September. Anecdotal evidence suggested that port congestion and disruption in the Red Sea had contributed to a further lengthening in suppliers' delivery times.
On a positive note, the rate of input price inflation decreased from August. Malaysian manufacturers partially transferred increased costs to clients by raising output charges, although the rate of charge inflation fell to a four-month low.
S&P said sentiment in the Malaysian manufacturing sector was positive at the end of the third quarter, driven by expectations of improved demand. Confidence levels strengthened to their highest point since the beginning of the year, supporting predictions of output growth in the coming year.
