Malaysian manufacturing shows resilience despite slowdown in orders

Employment rises at its third fastest pace on record as sector nears stabilisation.

Malaysia's manufacturing sector closed out 2025 on a cautiously positive note, with employment rising at one of the fastest rates since records began, despite a renewed slowdown in new orders.

The S&P Global Malaysia Manufacturing Purchasing Managers' Index (PMI) held steady at 50.1 in December, unchanged from November's reading.

The index remained marginally above the neutral threshold of 50.0, signalling a fractional strengthening in operating conditions across the sector.

Based on historical relationships between PMI figures and official data, the latest reading suggests solid year-on-year growth in both GDP and manufacturing output at the end of 2025.

The standout feature of December's survey was a substantial rise in workforce numbers. Employment increased for a second consecutive month, recording the third-fastest growth since data collection began in July 2012 and the strongest uptick in over seven years. Companies reported taking on additional staff ahead of new projects and to replace departing employees.

Manufacturing output showed signs of stabilising, with the latest decline minimal and representing the joint-weakest contraction in the current four-month period of moderation.

However, new orders slowed slightly in December following modest expansion the previous month. Muted demand trends were cited as the reason behind the easing of new business. Export orders also declined for a fourth consecutive month, with the pace of contraction slightly stronger than in November.

The slowdown in factory orders led companies to adjust their purchasing activity. Input buying stagnated in December, with the seasonally adjusted index aligning with the neutral threshold of 50.0 — marking the first month since June that goods producers did not increase their raw material purchases.

Malaysian manufacturers faced renewed challenges in receiving inputs on time, as suppliers' delivery times lengthened in December, reversing November's modest improvement. Adverse weather conditions and congestion were cited as factors, though the extent of delays remained slight.

Consistent with muted purchasing activity and extended lead times, stocks of purchases declined for a sixth consecutive month in December, though the rate of decrease was the weakest in three months. Holdings of finished goods also fell, at the fastest pace in eight months, as producers utilised stock to meet sales requirements.

Price pressures remained subdued in December. Manufacturers recorded only marginal increases in both input costs and output charges, with inflation rates the weakest in 12 and two months respectively. Where prices did rise, this was attributed to higher raw material costs, which some firms passed on to customers.

However, several companies reported offering discounts to clients in an effort to stimulate sales amidst subdued demand conditions and a competitive environment.

Looking ahead to the coming 12 months, confidence in the outlook for output remained historically strong, though the overall degree of optimism waned notably from November's 12-year high. Firms expressed hope that demand conditions would improve and support production growth.

Maryam Baluch, economist at S&P Global Market Intelligence, said: "The overall Malaysia Manufacturing PMI remained in positive territory as 2025 drew to a close. The key highlight from the latest survey was that employment rose at one of the strongest rates on record, whilst there were also encouraging signs of stabilisation in output.

"However, there were signs of moderation in new order inflows during December. Subdued demand conditions were reflected in softer price pressures, with inflationary trends remaining mild — partly due to the pause in growth of raw material purchasing activity."