Malaysia’s manufacturing sector remained in expansion territory in August, although momentum softened as new orders and production grew at a slower pace, according to MBSB Research.
The research house said the S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) moderated to 50.2 in August 2026 from 50.7 in July, marking the weakest reading in the current three-month expansion sequence.
A PMI reading above 50 indicates an expansion in manufacturing activity, while a reading below 50 signals contraction.
MBSB expects manufacturing activity to remain positive in the coming months, supported by sustained new orders and resilient demand for Malaysia’s electrical and electronics (E&E) and semiconductor products.
However, it cautioned that the softer PMI and more cautious purchasing activity suggest a sharp acceleration in manufacturing growth is unlikely in the near term.
MBSB said new orders continued to increase in August for a third consecutive month, although the pace of expansion moderated.
Production growth similarly slowed during the month, pointing to a more measured pace of manufacturing expansion after stronger momentum in the preceding months.
Underlying indicators were mixed.
One positive development was employment, which increased for the first time in four months as manufacturers responded to the improvement in order books.
However, companies remained cautious about committing to additional inputs. Purchasing activity declined during August, while manufacturers also reduced their inventories.
The combination of weaker purchasing and inventory reductions suggests businesses are maintaining a relatively cautious approach towards near-term production requirements despite the continued increase in demand.
Cost conditions also became more favourable for manufacturers, with both input and output price pressures easing to their weakest levels in six months.
The moderation in price pressures could provide some relief to manufacturers’ operating costs, although MBSB’s broader assessment suggests firms remain cautious about the strength of the near-term recovery.
Malaysia’s manufacturing sector continues to receive support from demand for E&E and semiconductor products, an important pillar of the country’s export-oriented industrial base.
MBSB expects this demand resilience and the continued expansion in new orders to keep manufacturing growth positive.
Nevertheless, the moderation in the August PMI to just above the 50-point threshold, slower growth in new orders and reduced purchasing activity indicate that factory activity is likely to expand at a moderate rather than accelerating pace in the coming months.
