PETALING JAYA: Malaysia’s manufacturing activity is anticipated to stabilise in the coming months, as analysts project improving confidence and resilient domestic demand will offset external headwinds.
Although October’s weaker purchasing managers’ index (PMI) signalled subdued operating conditions, research houses expect the sector to find firmer footing heading into next year, supported by policy continuity and regional trade diversification.
The S&P Global Malaysia Manufacturing PMI eased to a four-month low of 49.5 in October from 49.8 in September, staying below the neutral 50-point threshold that separates expansion from contraction. The softer reading reflected weaker new order inflows and cautious production planning, as manufacturers scaled back output at a slightly faster pace while relying on existing inventories to meet demand.
According to BIMB Research, Malaysia’s manufacturing sector remained subdued and broadly stable, staying in mild contraction in line with expectations for moderation in the second half (2H) of this year as temporary gains from front-loaded shipments dissipated.
It noted that the weakness stemmed from renewed declines in new orders, though optimism among companies about future business conditions strengthened to its highest level since April 2023.
“Domestic-oriented industries are expected to remain resilient, supported by firm consumer spending, steady investment activity, and continued diversification across products and export destinations,” BIMB Research said.
“Robust domestic demand, supportive policy measures, and deeper regional integration are likely to cushion external headwinds and sustain Malaysia’s manufacturing and trade momentum over the longer term,” it added.
Meanwhile, MBSB Research pointed out that the weaker October PMI points to a possible moderation in industrial production growth, suggesting softer momentum going forward.
The research house had earlier anticipated a stronger reading in September, “in line with the surge in exports, likely driven by front-loading of tech products ahead of potential semiconductor tariffs”.
TA Research highlighted that the latest PMI data still indicates a supportive backdrop for overall growth.
Citing S&P Global’s assessment, the research house said: “The historical relationship between Malaysia’s PMI data and official output figures indicates that the latest PMI reading points to a solid annual increase in both gross domestic product and manufacturing production at the start of the final quarter of the year.”
It observed that the PMI averaged 49.8 in the third quarter, up from 48.9 in the second quarter, suggesting that manufacturing continued to provide steady support to overall economic growth.
TA Research also noted improving sentiment among producers, stating that manufacturers expressed stronger optimism about the year-ahead outlook, with business confidence rising to a two-and-a-half-year high amid expectations of improved new orders.
It added that firms chose to absorb rising cost pressures and lower output charges for the first time in six months in an effort to stimulate demand and strengthen market competitiveness.
Regionally, BIMB Research observed that several Asean peers – including Indonesia, Thailand and Vietnam – saw firmer momentum, likely driven by frontloaded export orders ahead of looming US tariffs, while the Philippines rebounded from contraction.
In contrast, China’s manufacturing sector softened in October as both domestic and external demand weakened.
Malaysia’s latest PMI underscores a cautious but improving outlook, with analysts broadly expecting stabilisation in the months ahead.
The last instance of expansionary activity was recorded in May last year, when the index reached 50.2.
