KUALA LUMPUR (Dec 4): The overall upturn in Malaysia’s manufacturing sector as reflected in November 2017’s data, saw the headline Nikkei Malaysia Manufacturing Purchasing Managers’ Index TM (PMI) rising to a 43-month high of 52, the strongest improvement since April 2014.

This, according to IHS Markit which compiles the Nikkei survey, was a recovery from October’s three-month low of 48.6 and was consistent with the strongest improvement in the health of the sector since April 2014.

Additionally, the headline PMI in November recorded above the neutral 50 threshold for the first time in three months.

“The rise in the headline PMI index was supported by the fastest expansion in output in nearly three years. Output growth was reportedly supported by stronger inflows of new work,” Nikkei said.

“Moreover, the rate of expansion in new orders was the most pronounced since October 2014. A number of monitored companies commented on stronger underlying demand   conditions,” it added.

Nikkei explained the overall upsurge was a reflection of accelerated growth in both output and new orders, supported by improvements in domestic and overseas demand conditions.

Subsequently, firms raised their payroll numbers at the joint-strongest pace since December 2012, as a result of greater inflows of new business.

“Manufacturing firms increased their purchasing activity, thereby ending a six-month period of contraction. Meanwhile, firms raised their pre-production inventories to the greatest extent since March 2015,” Nikkei said.

However, it was noted that a shortage in raw materials reportedly led to slower average lead times for the first time in three months, although the degree of deterioration in vendor performance was modest.

Following reports of a general hike in raw material prices, input cost inflation intensified further and was overall sharp, while firms raised their average selling prices to pass on higher cost burdens to consumers, Nikkei said. 

Meanwhile, output charges were moderately raised.

“November data indicated a long-awaited improvement in the health of the manufacturing sector. The headline PMI rose to its highest level since April 2014, underpinned by stronger demand conditions,” said Aashna Dodhia, economist at IHS Markit. 

“Reflecting an increase in overseas demand for Malaysian goods, new export orders rose at the joint second-fastest rate in the series' history,” Aashna said.

“Overall, growth momentum in Malaysia is likely to be sustained towards the end of the year.”