Malaysia factory activity hits four-year high on stockpiling surge
Manufacturers rush to stockpile as selling prices surge to record levels
Malaysian manufacturing activity rose to its strongest level in four years in April, as factories accelerated production and stockpiled materials in response to disruptions caused by the war in the Middle East — even as selling prices climbed to an all-time high.
The S&P Global Malaysia Manufacturing Purchasing Managers' Index rose to 51.6 in April, up from 50.7 in March, marking the second consecutive month above the 50-point threshold that separates growth from contraction. It was the highest reading since December 2021.
The headline figure masked a more complex picture, however. Analysts at S&P Global cautioned that much of the apparent strength was driven not by genuine demand but by precautionary stockpiling, as manufacturers and their clients rushed to build safety stocks ahead of expected further price rises and supply shortfalls linked to the Middle East conflict.
New orders returned to growth after two months of decline, with buyers purchasing in bulk to insulate themselves against worsening shortages and escalating costs. Export orders told a different story, however, falling for the second month running as international customers pulled back — a trend attributed directly to the ongoing war.
The surge in production came at a significant cost. Input price inflation hit its highest level in nearly four years, driven by rising energy and raw material costs, whilst firms passed much of the burden on to customers: output charge inflation reached a record high in the history of the survey.
Supply chains showed fresh signs of strain. Delivery times for inputs lengthened at the most pronounced pace in nearly four years, with the Middle East conflict repeatedly cited as the cause. Holdings of pre-production materials fell for the tenth consecutive month as a result, even as firms stepped up purchasing activity.
On a more positive note, stocks of finished goods rose for the first time in five months, and manufacturers added jobs for the second month in succession — though the pace of hiring was insufficient to prevent a modest rise in backlogs.
Business confidence continued to erode. Optimism among Malaysian manufacturers fell to an eight-month low in April, with firms tempering their outlook in light of the worsening geopolitical situation.
Maryam Baluch, economist at S&P Global Market Intelligence, said the data illustrated the extent to which the Middle East war was reshaping behaviour across Malaysian industry. Stockpiling had supported both production and new orders in the short term, she noted, but supply-chain disruption remained widespread and stocks of inputs continued to fall despite increased purchasing. "The sector's performance in the coming months will be partly shaped by how the situation in the Middle East unfolds," she said.
