Manufacturing PMI slips to 46.5 but confidence level rising

Malaysia’s manufacturing Purchasing Managers’ Index (PMI) dipped to 46.5 last month from 47.8 in December, “indicating a stronger moderation in the health of the sector”, said S&P Global.

S&P Global Market Intelligence economist Usamah Bhatti said there were further signs that economic conditions in Malaysia remained muted as challenging conditions across the manufacturing sector limited demand and production at Malaysian manufacturing companies.

“That said, two positives came from the latest survey result, the first being a renewed expansion in employment, helping firms to keep on top of workloads and setting a base to expand output in the future should demand start to regain momentum.

“The second was the first reduction in delivery times in just over three years as material shortages, port congestion and delivery issues continue to normalise.

“Better availability of materials also contributed to the softest rise in input prices in the current sequence of inflation that began in June 2020,” said Bhatti in a research note.

S&P Global said the weaker headline figure was in part due to a stronger moderation in output volumes that was the steepest reported for 16 months.

It said the moderation in headline figure was sharp and the steepest since August 2021 as manufacturers observed that demand and client confidence were muted in both domestic and international markets.

“As such, export demand for Malaysian manufactured goods fell further, and at the sharpest pace since June 2021,” it said.

While demand conditions moderated, S&P Global said the supply chains were able to improve at Malaysian goods producers as delivery times shortened for the first time since November 2019, albeit only marginally.

On the price front, input costs increased for the 32nd month running last month although the rate of inflation continued to ease and was the softest recorded in this sequence, as firms reported lower prices for a variety of inputs, including oil.

“Looking ahead, Malaysian manufacturers were increasingly optimistic regarding the yearahead outlook for output amid hopes that both domestic and external demand conditions would improve as the global economy recovers.

“The overall level of confidence rose to the strongest since August 2019 as a result,” it noted.

Better availability of materials also contributed to the softest rise in input prices in the current sequence of inflation that began in June 2020. USAMAH BHATTI S&P Global Market Intelligence economist