Thursday 28 Mar 2024
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KUALA LUMPUR (Nov 1): The Malaysia Manufacturing Purchasing Managers' Index (PMI) rose to 49.3 in October — its highest level in six months — as the business environment improved, according to IHS Markit.

The index rose from 47.9 in September, reviving to sit broadly in line with its historical average, it said in a report today.

The healthier business environment was driven by a rise in the survey's gauge of production volumes to a 12-month high.

Furthermore, survey respondents linked improved demand to new product launches and stronger new work inflows from existing clients.

"The PMI's main gauge of production growth has risen to its highest for a year, broadly indicative of the economy growing at an annual rate in excess of 5%," said IHS Markit Chief Business Economist Chris Williamson.

This increase was driven by new orders and output, with both indicators showing signs of improvement.

Citing an analysis of comparable historical official data on Malaysian manufacturing, IHS suggested that at current levels, the survey's output index is consistent with annual production growth of approximately 5.5%.

However, external conditions reportedly became more challenging at the start of the fourth quarter, causing export orders to decline for a second successive month.

IHS Markit highlighted China and Europe as two key sources of weak demand.

Nevertheless, with the overall new orders index rising, survey data suggests domestic demand conditions helped provide a key driving force to help offset the external demand downturn.

"Production is being buoyed by improved domestic demand in particular, but external conditions remain challenging, dampening export growth once again and raising concerns about how much further momentum can continue to build in the absence of improved global economic conditions," Williamson added.

However, more companies reported improved investment intentions, while forecasts of greater demand also underpinned optimism.

"An increased number of companies reported improved investment intentions, while forecasts of greater demand also underpinned optimism," said the research house.

Upward trends in other forward-looking indicators were also seen at the start of the fourth quarter, greater output requirements and improved demand gave more firms an incentive to stockpile in order to accommodate for further improvements.

Elsewhere, there was a first month-on-month decline in input costs since March during October. Deflation reportedly stemmed from discounts from suppliers and lower commodity prices.

As a result, Malaysian manufacturers reduced their output charges to the fastest extent since January 2015 in order to gain a competitive edge.

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