Malaysia's manufacturing PMI edges up in January as strong ringgit sends costs tumbling

Business confidence is also highest in 12 years.

Malaysia's manufacturing sector showed further signs of improvement in January, with production returning to growth and business confidence surging to one of its highest levels in 12 years, aided by the first drop in input costs since the early days of the pandemic.

The Purchasing Managers' Index from S&P Global edged up to 50.2 from 50.1 in December, marking a third consecutive monthly improvement and the joint-highest reading since August 2022. The index remained only slightly above the neutral mark of 50.0, indicating modest growth.

Production volumes rose for the first time in five months, expanding at the strongest pace since July 2022. New orders stabilised after a slight decline in December, with manufacturers reporting that whilst demand conditions remained subdued, they had shown some signs of improvement. Crucially, export orders increased for the first time in five months, rising at the fastest rate since July 2024.

In response to higher production requirements, firms stepped up their purchasing activity modestly, marking the strongest increase in nearly four years. However, employment fell marginally, reversing December's job creation which had ranked amongst the fastest on record.

Inventories continued to decline, though at softer rates. Stocks of raw materials decreased only marginally, whilst holdings of finished goods were also depleted, albeit more slowly than in previous months. Manufacturers managed to stay on top of their workloads, with backlogs falling for a fourth consecutive month, though at the weakest pace in that sequence.

Supply chain pressures mounted slightly, with delivery times lengthening for a second straight month, though the extent of delays remained modest overall.

The headline development was a notable easing of cost pressures. Input costs fell for the first time in 68 months—since May 2020—as firms benefited from the appreciation of the Malaysian ringgit, which reduced the cost of imported materials. Selling prices increased only modestly, rising for a third consecutive month but at a rate weaker than the long-term average.

Business sentiment rebounded sharply, reaching the second-highest level since October 2013, behind only November 2025. The anticipation of new contracts and signs of improved demand conditions underpinned the optimism.

Maryam Baluch, economist at S&P Global Market Intelligence, said the Malaysian manufacturing sector had signalled strengthening business conditions for a third straight month. "Another key element from the latest survey was a first fall in input costs since May 2020 as firms benefited from the effects of a stronger ringgit," she noted. "A lack of inflationary pressures should hopefully help to support growth in the months ahead."

The survey data suggest the economy entered the new year with steady GDP growth and a further year-on-year expansion in official manufacturing production.

The survey polled around 400 purchasing managers across Malaysia's manufacturing sector.