Analysts believe the December 2025 PMI indicators signal that manufacturing output as measured by the industrial production index should see a continued uptrend following two months of expansion.
PETALING JAYA: Malaysia’s manufacturing sector is expected to maintain a stable growth pace despite a slowdown in new orders reflected in S&P Global Inc’s December 2025 manufacturing purchasing managers index (PMI) released last week.
The December manufacturing PMI was unchanged at 50.1, compared to November.
A reading above 50 means an expansion. The manufacturing PMI tracks new orders, inventories, production and sectoral employment, among others. For the whole year, PMI averaged 49.4.
Analysts believe the December 2025 PMI indicators signal that manufacturing output as measured through the industrial production index (IPI) should see a continued uptrend following two months of expansion.
TA Research said while the slowdown in new orders signals potential moderation in manufacturing activity in the months ahead, firms remain historically confident about their output outlook.
“This confidence is underpinned by expectations of improving demand conditions, suggesting that production is likely to remain resilient despite softer incoming orders. Overall, the sector is expected to expand at a gradual, rather than abrupt, pace in early 2026,” it said.
It noted that the drop in new orders in December following a modest expansion in November reflected subdued demand conditions, while the fourth consecutive month in the softening of new exports orders indicated persistent weakness in external demand.
The brokerage has maintained its manufacturing sector gross domestic product (GDP) growth forecast at 4% year-on-year (y-o-y) in the fourth quarter of 2025 (4Q25) and has also maintained its overall GDP projections at 4.7% y-o-y for both 4Q25 and full-year 2025.
It said the full-year manufacturing PMI performance indicated that the manufacturing sector was in the early phase of recovery, with clearer signs of stabilisation emerging toward year-end.
MBSB Research said while overall sentiment remained positive, business optimism eased from the previous 12-year high supported by recovering demand conditions and improved production growth.
It added that while new orders moderated, output showed further signs of stabilisation. Buying activity was unchanged, marking the first stagnation since June 2025.
“Supplier delivery times lengthened again amid adverse weather conditions and congestion, although disruptions remained contained.
“Finished goods inventories declined at the fastest pace in eight months as firms relied on existing stocks to fulfil demand. On the price front, both input costs and output charges increased only marginally, leaving inflation at multi-month lows,” it said.
It expects the November IPI to register a softer reading reflecting a moderation in exports growth, but this would remain supported by the robust November manufacturing PMI performance signalling a continued uptrend in IPI growth.
IPI grew 6% y-o-y in October after expanding 5.7% in September.
