The dawn of a rebound in the manufacturing industry was fleeting, and Malaysian manufacturers were worried again in June?

Malaysia's manufacturing purchasing managers' index (PMI) fell below the 50-point boom and bust line in June to 49.9 points, down from 50.2 points in May.

According to the June manufacturing PMI report released by S&P Global (S&P Global), overall demand remains sluggish even though new orders from Malaysia are increasing for two consecutive months, driven by increased exports.

S&P Global pointed out that after increasing production in May, the manufacturer slightly reduced production in June. This is because demand is still sluggish, and manufacturers are expanding production more slowly than in May.

“The overall growth in new business reflects, to some extent, the continued growth of new export orders, which have been growing for 2 consecutive months.”

According to the report, new orders from customers in Asia Pacific regions such as Australia and the Philippines have increased, driving the growth of new export orders.

On the other hand, due to reduced pressure on production capacity, the number of employees in the manufacturing industry remained unchanged, and the survey conducted last month (May) showed a slight increase in the number of employees.

Furthermore, backlog orders declined for the 25th month in a row, and the growth rate of new orders did not offset the reduction in backlog orders. The growth rate of new orders was the slowest since February.

Due to the sluggish demand environment, companies are also reducing inventory. Procurement activities, input inventories, and manufactured goods inventories all declined in June.

Manufacturers said that rising raw material costs and exchange rate fluctuations have led to further increases in input prices.

Although inflation in Malaysia remained stable and at the same level as in May, the rate at which companies raised their own sales prices further accelerated, at the fastest rate since September 2022.

S&P Global anticipates that new orders will continue to grow in the coming year and support manufacturing prospects.

Despite this, Malaysia's confidence declined for the 5th month in a row in June, the lowest level since August 2023.

Andrew Huck, director of global economics at S&P, said that after May's growth, June was basically a relatively stable month for Malaysian manufacturers.

He pointed out that although demand is still sluggish, manufacturers can still get new orders.

“Judging from the performance of the second quarter, the manufacturing purchasing managers' index has improved compared to the beginning of this year, which is good news for the upcoming official data.”