The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers' Index (PMI) fell to 48.6 in December 2024 from 49.2 in November, with cost increases at their slowest pace in over four-and-a-half years, since June 2020.

A PMI reading above 50 indicates overall growth from the previous month, while a reading below 50 signals contraction.

S&P Global said December's drop was the sharpest since March 2023, reflecting muted trends in the Malaysian manufacturing sector as the year ended.

"Positively, input price inflation slowed sharply in the month and was the weakest in the current 55-month sequence of rising input costs, contributing to only a fractional increase in output charges," it said in a statement today.

Commenting on the performance, S&P Global Market Intelligence economist Usamah Bhatti said the final round of 2024 PMI data suggested that demand conditions in the Malaysian manufacturing sector remained subdued in December, as production and new order inflows moderated at modest rates.

"That said, the data are still consistent with the GDP growth seen in the third quarter of the year continuing, albeit at a softer pace. Further evidence indicates that conditions are likely to remain muted in the short term," he said.

According to Usamah, December's PMI data showed that firms opted to work through existing orders in the absence of new order growth, while also scaling back employment, purchases, and stock holdings.

Positively, he noted that inflationary pressures softened sharply in December, with average cost burdens rising at the slowest pace since the sequence began in June 2020, and charges only raised fractionally in response.

"Lower cost pressures also fed into confidence regarding the outlook for 2025, as firms noted solid optimism underpinned by a broad-based improvement in demand conditions, both domestically and in international markets," he added.