KUALA LUMPUR (Oct 1): The September Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) data signalled the strongest improvement in Malaysian manufacturing conditions for ten months, driven by a faster rate of job creation.

Manufacturers added to their payrolls at a rate not seen since the opening month of the survey in July 2012, said IHS Markit, which compiles the survey, in a statement today.

It said Output and new business continued to rise at comparatively solid rates. The latest survey also revealed an inflationary impact from the recently-introduced Sales & Service Tax (SST).

The reading remained above 50.0 in September, marking the first sequence of positive readings in three-and-a-half years.

Moreover, the headline figure rose to 51.5, from 51.2 in August, indicating the strongest overall manufacturing performance since November 2017.

IHS Markit said the upward movement in the headline PMI was driven by a stronger rise in employment.

It said the rate of job creation in the manufacturing sector was the strongest since the first month of the survey’s operation in July 2012.

It said firms reported taking on more staff in preparation for expected workloads.

IHS Markit said the volume of new work received by Malaysian manufacturers rose for the second month running in September, despite the introduction of the new SST at the start of the month.

It said that in fact, it was the first  back-to-back rise in new business in the goodsproducing sector for nearly four years.

New export  orders increased for the third month running, albeit at a weak rate, it said.

Commenting on the Malaysian Manufacturing PMI survey data, IHS Markit economics director Paul Smith said Malaysia’s manufacturing economy defied the challenges of the recently introduced SST to register its strongest rate of growth in ten months, led by the second sharpest gain in employment in the survey history.

“Both output and new orders rose since the previous month. That said, rates of growth remained relatively tepid, with confidence about the future dipping to a three-month low amid worries amongst firms on how the introduction of the SST will affect demand and subsequently production going forward.

“Indeed, the impact of the SST is already being felt on the pricing side, with input cost inflation jumping up to a six-month high in September and output charges being raised for a third successive month,” said Smith.