The latest data on the Malaysian manufacturing sector showed mixed trends at the start of the second quarter, with overall demand conditions remaining subdued despite improvement in exports.
S&P Global noted that the subdued demand is leading firms to limit production and scale back their purchasing activity, although there were some positive signs with regard to new export orders.
In a statement today, it said there is also a positive trend in employment, with firms taking on additional staff for the fourth month running, while suppliers’ delivery times continued to shorten and the rate of input cost inflation remained muted, enabling firms to reduce their output prices as part of efforts to stimulate demand.
The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) was unchanged at 48.8 in April, signalling that business conditions remained challenging for firms.
The latest PMI reading suggested that Gross Domestic Product growth is running at a similar level to that seen in the final quarter of 2022 as well as modest year-on-year improvements in official industrial production data, it said.
S&P Global Market Intelligence economics director Andrew Harker said while the latest PMI data suggest that demand conditions remained subdued in the Malaysian manufacturing sector in April, the data are still consistent with reasonable growth in official numbers.
“Moreover, there were some positive signs emanating from the latest survey. Export demand ticked up, hopefully providing an early signal that the overall demand environment will start to strengthen soon. Firms also had more success in securing new staff members during the month.
“With price and supply pressures also having shown improvement, the sector is hopefully set for a strengthening of growth momentum as the quarter progresses,” he commented.
S&P Global said manufacturers often noted that demand in the sector remained muted at the start of the second quarter, with some reports of customers reducing the size of their orders and as a result, total new business moderated for the eighth consecutive month, and to a broadly similar extent to that seen in March.
It also noted that demand conditions in international markets were more positive, with new export orders up fractionally following a nine-month sequence of softening with stocks of finished goods decreased amid the delivery of orders or their collection by customers.
On employment, the research firm noted that companies had reported success in securing additional staff members in April and as a result, employment increased for the fourth successive month with the rate of job creation was modest, but quickened to a seven-month high.
“Higher workforce numbers, alongside subdued new orders, meant that firms were able to deplete backlogs of work again during the month,” it said.
S&P Global shared that in contrast to the trend in employment, purchasing activity continued to be scaled back as the muted picture for new business deterred firms from buying additional inputs, in turn, stocks of purchases also decreased.
“Reduced demand for inputs helped lead to an improvement in vendor performance, with improved capacity at suppliers and a lack of port congestion also aiding a reduction in lead times.
“Suppliers’ delivery times shortened for the fourth successive month and to one of the greatest extents in the past decade,” it explained.
The research firm also noted that there were further signs of raw material prices levelling off in April as input costs rose only slightly while the rate of inflation was broadly in line with the 34-month low posted in March.
With cost inflation muted, firms were able to offer discounts to customers to help provide a boost to demand. Selling prices ticked lower, ending a three-month sequence of inflation, it added.
