PETALING JAYA: While Malaysia’s manufacturing conditions showed a rebound in June, Kenanga Research says the recovery “still looks fragile”.
According to the research house, caution is still warranted, even though it foresees stable manufacturing conditions in the near term.
The manufacturing Purchasing Managers’ Index (PMI) by S&P Global rose to 50.7 in June, up from 49.9 in May.
A reading below 50 indicates contraction in the manufacturing activities.
S&P Global Market Intelligence economist Maryam Baluch said June’s PMI data for Malaysia’s manufacturing sector points to a wait-and-see approach among firms.
“While new orders and production showed signs of encouraging revival, buying and hiring activity were kept unchanged.”
In a separate note, Kenanga Research said the June reading brought the average PMI for the second quarter of financial year 2026 (2Q26) to 50.7, from 1Q26’s 49.9.
This points to a stronger manufacturing gross domestic product (GDP) growth for the quarter.
“That said, weak hiring and purchasing activity suggests firms remain cautious about the durability of demand.
“Supply chain disruptions and geopolitical risks continue to cloud the outlook.
“The PMI rebound, together with its high historical correlation with official data, points to firmer manufacturing output and its contribution to GDP growth in 2Q26.”
It added that risks for the second half of financial year 2026 (2H26) remain tilted to the downside, as inventory-driven growth in the region could fade if demand softens and cost pressures persist.
“We, therefore, maintain our 2026 GDP forecast at 4.5% (2025: 5.2%), reflecting a balanced but cautious outlook.”
S&P Global PMI findings showed that the June reading signalled fresh growth in output across the Malaysian goods-producing sector amid a renewed rise of new factory orders. Meanwhile, purchasing activity and staffing levels were held steady during the latest survey period.
Survey respondents continued to indicate that the war in the Middle East fed through to sharply rising input costs, which then translated into increased charges.
While the rate of input cost inflation eased, charges were raised to a greater extent in June.
The two largest sub-components of the PMI – new orders and output – registered fresh expansions during the latest survey period, after May saw slight moderations.
After marginal increases seen in both April and May, manufacturers across Malaysia kept their purchasing activity unchanged at the end of 1H26.
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.
S&P Global said 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.
Baluch noted that firms would need clearer support from demand before the country can see the needle move in a positive direction for hiring and purchasing.
