Malaysia’s PMI Stays at 49.7 in August, Signalling Modest Decline in Manufacturing Sector

The seasonally adjusted S&P Global Malaysia manufacturing purchasing managers’ index (PMI) remained steady at 49.7 in August, indicating a slight decline in the Malaysian manufacturing sector.

The latest PMI data suggest gross domestic product (GDP) growth is running at a broadly similar rate to that seen in the second quarter, as well as pointing to modest year-on-year improvements in official manufacturing production data.

S&P Global Market Intelligence economist Usamah Bhatti said the latest PMI data suggested that demand conditions in the Malaysian manufacturing sector remained subdued midway through the third quarter of 2024, as production and new order inflows moderated at a marginal rate.

That said, the data are still consistent with the GDP growth seen in the second quarter of the year continuing.

“However, further evidence was provided to indicate that conditions are likely to remain subdued in the short term. Firms opted to work through existing orders in the absence of new order growth, while firms also scaled back purchases, employment and stock holdings.

"Positively, firms remained confident that output would improve over the coming year, with the degree of confidence solid overall. That said, firms mentioned that they remained unsure regarding the speed of the recovery, with downside risks centred around a muted global economy,” he said in a report.

According to S&P, manufacturers often noted that demand in the sector remained muted during August, with reports of weak customer confidence. Total new business moderated slightly for the second month running.

At the same time, demand conditions in international markets improved for the fifth month in a row but at the softest rate in the current sequence.

With customer demand staying weak, manufacturers reduced production for the third month in a row. The pace of this reduction intensified from July, reaching its strongest level in four months.

Concurrently, stocks of finished goods were wound down further, as firms used existing stocks to fulfil orders.

Malaysian manufacturers reported a slight decrease in employment for the second consecutive month. They signalled to have adequate capacity as the level of outstanding business fell once more in August, marking the largest decline since April.

Firms operating in the Malaysian manufacturing sector signalled a marked rate of input cost inflation midway through the third quarter. Anecdotal evidence suggested that raw material prices had risen, notably those sourced from abroad due to exchange rate weakness. In response, output charges were raised for the fifth month in a row.

In line with trends for new orders and production, purchasing activity was scaled back marginally in the latest survey period as the muted picture for new business weighed on input purchasing decisions. In turn, stocks of purchases also decreased, and at the steepest rate for four months, S&P said.

“Hopes that new orders will return to growth territory supported confidence that production will rise over the coming 12 months. The overall degree of optimism was solid, but weaker than the long-run series average,” it added.