Malaysia factory growth weakest in three-month run
Its manufacturing PMI stood at 50.2, slipping from 50.7 in June and July.
Malaysia's manufacturing sector saw only a slight improvement in health midway through the third quarter, as slower new order growth fed through into a renewed moderation in production, the latest S&P Global survey showed.
The seasonally adjusted Malaysia Manufacturing Purchasing Managers' Index (PMI) posted above the neutral 50.0 mark for a third straight month in August, but a reading of 50.2 — down from 50.7 in both July and June — signalled the weakest improvement in that run. The historical relationship between the PMI and official data suggests GDP and manufacturing output growth should nonetheless strengthen in the third quarter.
Production growth eased for the first time in three months, with the moderation the fastest since February. Manufacturers linked the slowdown to weaker new order growth, material shortages and challenging economic conditions. New orders themselves rose for a third consecutive month, but at only a marginal pace — the weakest in the current growth run — for broadly the same reasons weighing on output.
Even so, sustained order growth encouraged some firms to expand their workforces, with employment rising for the first time in four months as manufacturers took on both full- and part-time staff, albeit modestly. Backlogs of work fell for a second consecutive month, though only marginally, pointing to a continued lack of pressure on capacity.
Purchasing activity moved the other way, falling for the first time in five months as some manufacturers cited weak market conditions, elevated raw material prices and sufficient existing stock as reasons to scale back buying. Firms drew on inventories to meet order growth, with both input stocks and finished goods declining over the month. Delivery times for inputs lengthened again, with poor weather, low stock availability and port congestion cited as the main causes, though the incidence of delays was the least pronounced in seven months.
Input costs and output charges both rose only modestly in August, with inflation easing to a six-month low and historically subdued rates. Where prices did rise, firms pointed to higher fuel and raw material costs, often passed on to customers.
Manufacturers remained generally confident that output would rise over the coming year, though sentiment stayed historically weak and broadly unchanged from July, with optimism resting mainly on hopes that demand would continue to improve.
Maryam Baluch, economist at S&P Global Market Intelligence, said the Malaysian manufacturing sector had lost some momentum midway through the third quarter as production moderated and new order growth eased. She noted that manufacturers remained divided amid subdued demand, with employment rising for the first time in four months even as purchasing activity fell for the first time in five as firms drew on inventories to meet demand.
Baluch added that confidence remained muted, suggesting current challenging conditions were likely to persist over the coming year, though softer price pressures could give firms some scope to support demand growth and lift production.
