KUALA LUMPUR: Malaysia's seasonally adjusted S&P Global manufacturing purchasing managers' index (PMI) rose to 50.7 in June from 49.9 in May, signalling a renewed and modest improvement in the manufacturing sector.
The index has posted above the neutral mark of 50.0 in three of the last four survey periods.
S&P Global Market Intelligence economist Maryam Baluch said June's PMI data indicated that Malaysian manufacturers were adopting a wait-and-see approach, with new orders and production showing encouraging signs of recovery while buying and hiring activity remained unchanged.
"Before we can see the needle move in a positive direction for hiring and purchasing, firms would need clearer support from demand. With year-ahead confidence remaining relatively muted, companies are likely to stay cautious for now.
"Overall, firms appear to be focusing on rebuilding margins, which came under pressure due to the fallout from the war in the Middle East. Latest data noted that as cost pressures eased, the pace of output charge inflation quickened,” she said in a statement.
S&P Global said the historical relationship between the PMI and official data suggests that both Malaysia's GDP and official manufacturing production are likely to record stronger growth in the second quarter of 2026.
The PMI's two largest components, new orders and output, returned to growth in June as stronger underlying demand lifted manufacturing production.
“However, after marginal increases seen in both April and May, manufacturers across Malaysia kept their purchasing activity unchanged at the end of the first half of the year.
“While growth in new orders prompted some firms to raise their purchases of inputs and raw materials, others noted that demand was insufficient to trigger an increase in buying activity,” it said.
As a result, S&P Global said stocks of purchases were held broadly stable during the latest survey period.
Manufacturers kept input inventories broadly stable despite longer supplier delivery times, which were attributed to material shortages and geopolitical uncertainties.
Difficulties sourcing materials led to a fresh rise in outstanding business volumes in June. The uptick was marginal, however.
“Companies continued to note that the war in the Middle East exerted upward pressure on fuel and raw material prices. As a result, cost burdens rose sharply during June. Nonetheless, the pace of inflation eased further to the slowest in three months,” S&P Global said.
It noted that selling prices rose more sharply in June than in May, with inflation remaining strong and above the long-run average.
Growth in new orders led some manufacturers to raise their staffing levels in June. However, job shedding was recorded at other companies, thereby leaving the overall employment picture unchanged over the course of the month.
“Lastly, Malaysian manufacturers remained optimistic that output will rise over the coming 12 months. Underpinning confidence were hopes that demand conditions will improve, which in turn would feed through to higher output over the coming year.”
