TA Research said “the January PMI reading is encouraging, having remained in expansionary territory for three consecutive months”.
PETALING JAYA: The manufacturing sector is poised for a steadier 2026 as early indicators point to firmer activity and improving confidence at the start of the year. Forward-looking signals from factory surveys suggest that output and demand conditions are beginning to stabilise after a prolonged soft patch.
These trends come as the S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) registered 50.2 in January 2026, staying above the neutral threshold for a third straight month.
Commenting on the data, TA Research said “the January PMI reading is encouraging, having remained in expansionary territory for three consecutive months”.
“Business sentiment regarding output prospects also rebounded noticeably in January, supported by expectations of new contract wins and early signs of improving demand conditions,” it added.
The brokerage noted that the overall level of optimism was the second-highest since October 2013, surpassed only by November 2025.
Still, it cautioned that risks remain tilted to the downside, particularly from external uncertainties such as escalating trade tensions and potential spillovers from a renewed global trade war, which could disrupt supply chains and weigh on export-oriented manufacturing activity.
Given manufacturing’s role as Malaysia’s second-largest contributor to gross domestic product (GDP) after services, TA Research said it would continue to closely monitor the sector’s performance.
“Given the historical correlation between PMI trends and official macroeconomic indicators, Malaysia appears to have entered the new year on a steady footing, consistent with continued GDP growth and a further year-on-year expansion in official manufacturing output,” it said.
“Our GDP growth forecast for 2026 remains unchanged at 4.3% to 4.7% (for now), underpinned by resilient domestic demand and a gradual recovery in external trade conditions,” it added.
TA Research highlighted that the slight uptick in the headline index was driven by a renewed increase in manufacturing output in January, noting that the seasonally adjusted production index returned to expansion territory for the first time in five months.
While modest, it noted that the pace of growth was the strongest recorded since July 2022, suggesting output conditions are gaining traction.
Demand conditions, meanwhile, stabilised in January, with new export orders rose for the first time in five months, recording the fastest pace of expansion since July 2024.
