Thursday 28 Mar 2024
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KUALA LUMPUR (Oct 3): The Malaysian manufacturing sector suffered a loss of momentum at the end of the third quarter of 2022 as demand showed signs of waning and firms scaled back their production and purchasing activity accordingly.

In a statement on Monday (Oct 3), S&P Global Market Intelligence said that on a more positive note, firms expanded their staffing levels to the greatest extent in almost three-and-a-half years.

Meanwhile, firms continued to record increases in input costs and longer suppliers' delivery times, but in both cases to much lesser extents than seen earlier in the year.

The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) moved back below the 50.0 mark in September, posting 49.1 from 50.3 in August.

S&P Global said the latest reading was the lowest for a year.

Averaging 50.0 over the third quarter of the year, the PMI is representative of just over 5% year-on-year growth of GDP in Malaysia, thereby representing some loss of momentum from the situation in the second quarter.

Similarly, latest data suggest a softening in the rate of expansion signalled by official manufacturing data.

Central to the loss of momentum in the latest survey period were reports of waning customer demand.

This resulted in a moderation in new orders in September, ending a five-month sequence of expansion.

Similarly, new export orders slowed amid weakness in international demand conditions.

A lack of demand led manufacturers to scale back production for the second successive month, with the rate of moderation accelerating to the fastest since March.

On a more positive note, firms were successful in hiring additional staff at the end of the third quarter, resulting in a first expansion of workforce numbers in ten months.

Although modest, the rate of job creation was the sharpest since April 2019.

The hiring of additional staff was part of efforts by manufacturers to bear down on backlogs of work, and these plans were further helped by a lack of pressure from new order inflows.

Outstanding business therefore decreased solidly in September, and to the greatest extent in just under two years.

Purchasing activity moderated for the first time in four months as firms responded to a lack of customer demand.

The reduction in input buying was only marginal, however.

Lower purchasing and efforts to limit stock holdings fed through to a reduction in pre-production inventories, and one that was the most marked since August 2021.

Stocks of finished goods were also down, with manufacturers often favouring the use of existing inventories to meet new order requirements rather than expanding production.

Suppliers' delivery times lengthened again in September,due to raw material shortages and shipping delays.

The lengthening of lead times was much weaker than those seen earlier in the year, however.

Hopes that the demand weakness seen in September will prove to be short-lived supported optimism in the year-ahead outlook for manufacturing production, with sentiment broadly in line with the series average.

That said, concerns over the potential for a more prolonged slowdown meant that optimism dipped to a three-month low.

S&P Global Market Intelligence economics director Andrew Harker said there were further signs in September that the rebound in growth in the Malaysian economy seen earlier in the year could be losing steam as challenging conditions across the global manufacturing sector limit demand and production at Malaysian firms as well.

“That said, the latest PMI data are still indicative of growth in official data across the third quarter of the year.

"The main positive from the latest survey was 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,” he said.

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