PETALING JAYA: Domestic manufacturers’ adaptability to uncertain geopolitical conditions together with a largely stable global economic landscape should continue to support the economy as well as the manufacturing sector in the third quarter of financial year 2026 (3Q26).
Analysts were cautiously optimistic on the country’s manufacturing sector following the release of the S&P Global Malaysia manufacturing purchasing managers’ index (PMI) on Tuesday that showed manufacturing activities continuing to expand in August at 50.2.
While this was lower than the 50.7 recorded in June and July, they pointed out that sentiment among manufacturers remained optimistic, with Phillip Capital Research noting that the Statistics Department’s business tendency survey showing a plus 8.2 in 3Q26 rebound from a 1.6 contraction in 2Q26.
“Most manufacturers are turning more optimistic about future production in 3Q26, while stronger order volumes from both domestic and export markets also contributed to the improvement in confidence.
“This partly reflects manufacturers’ adaptation to heightened geopolitical risks, while stable global economic conditions have further supported business sentiment,” it added.
The brokerage said PMI movements in August among Asean countries were relatively mixed, with Indonesia’s PMI falling back into contractionary territory as production and employment failed to sustain their previous upward momentum.
Meanwhile, Thailand and the Philippines posted positive readings, with both countries seeing substantial increases in output and new orders as manufacturers reported improving demand conditions.
In the Asia-Pacific region, manufacturing PMI in most major economies remained above the 50-neutral level in Aug 2026, continuing the trend since December 2025.
South Korea and Taiwan reported declines in PMI, although output and new orders continued to support the expansion of their manufacturing sectors.
Japan’s PMI rose to a four-month high, with growth in new export business and employment accelerating to its fastest rate since 2018.
Similarly, China reported an increase in PMI, with new orders rising again for the 15th consecutive month, registering the longest streak of growth since 2018.
Globally, the manufacturing PMI rebounded to a three-month high in August 2026, attributable to accelerated growth in output and new orders, while employment increased at the fastest pace in three years.
TA Research said the latest PMI readings remain consistent with continued expansion in Malaysia’s economy and manufacturing sector in 3Q26, although the pace of growth is likely to moderate.
It said the PMI averaged 50.5 in July to August, slightly below the 50.7 average recorded in 2Q26, indicating that manufacturing conditions remain supportive but have lost some momentum.
Encouragingly, new orders continued to expand and employment returned to growth, providing some support to activity in the coming months.
It said that while manufacturers were optimistic that output would increase over the next 12 months mainly by expectations of improving demand, the degree of positive sentiment remained historically subdued and was broadly unchanged from July, suggesting that firms continue to adopt a cautious stance toward the near-term operating environment.
