Malaysia's manufacturing sector to grow in H2 despite dip in June indicator
However, business sentiment has declined for the fifth consecutive month, which could impact optimism.
Analysts are hopeful about the future of Malaysia's manufacturing sector in the second half of the year, despite a slight decrease in the Purchasing Managers' Index (PMI) to 49.9 in June.
Public Investment Bank Bhd (PublicInvest) stated that Malaysia's PMI is expected to follow global trends, consistently exceeding the 50-level mark in the second half of 2024, as long as global uncertainties stabilize.
The company also mentioned that Malaysia's manufacturing sector is set for positive growth in 2024, driven by strong projections in the global semiconductor market. With electric and electronic (E&E) exports making up over 40% of Malaysia's total exports, the sector is expected to benefit significantly. Despite the tension between countries and economic uncertainties, Malaysia's exports are predicted to increase by 5.4% year-on-year in 2024. Improved economic governance and competitiveness ranking also support this positive outlook.
PublicInvest also noted that the average PMI reading for the second quarter of 2024 reached its highest level since the third quarter of 2022, indicating a positive trajectory for economic growth throughout the quarter.
However, the firm mentioned that business sentiment declined for the fifth consecutive month in June, reaching its lowest point since August 2023, which could impact some optimism.
Kenanga Research shared similar sentiments, anticipating significant growth in the manufacturing sector due to strong domestic demand and foreign direct investments. The labour market is expected to improve with the implementation of the progressive wage policy, supporting recovery in the manufacturing sector. Additionally, the firm believes that the global semiconductor industry's improvement, driven by computing needs and China's economic recovery, will benefit Malaysia.
Thus, Kenanga Research has maintained its optimistic GDP projection of 4.5% to 5%in 2024, in line with forecasts from Bank Negara Malaysia and the Ministry of Finance.
S&P Global Market Intelligence reported that Malaysia's manufacturing sector remained steady at the end of the second quarter, supported by an increase in new orders over the past two months. Whilst demand overall remained subdued, higher exports partly contributed to this growth.
In June, the seasonally adjusted S&P Global Malaysia Manufacturing PMI was 49.9, slightly less positive compared to May.
However, the average reading for the second quarter of 2024 was the highest since the third quarter of 2022, suggesting a positive outlook for economic growth during that period.
