Thursday 28 Mar 2024
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KUALA LUMPUR (Sept 1): The Malaysian manufacturing sector reported a moderation in growth momentum midway through the third quarter of 2022 (3Q22), according to S&P Global's latest indicator of economic health for Malaysia's manufacturing sector.

The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) slipped to 50.3 in August from 50.6 in July, indicating a softer improvement in the health of the sector.

The latest reading is representative of a gradual slowdown in growth of manufacturing production and gross domestic product towards the end of 3Q22, following sustained rises throughout 2Q22.

S&P Global said the softer headline figure was largely due to a renewed moderation in output volumes that was the first since May.

"That said, the rate of reduction was only fractional. Firms commonly attributed muted production to difficulty receiving inputs amid sustained delivery delays, though these were not as severe as in previous months.

"While output levels were scaled back for the first time in three months, incoming orders continued to improve and registered the strongest rise since April, though the rate of growth was mild," it added.

Export demand for Malaysian manufactured goods fell, however, at the sharpest pace for a year amid weak global economic conditions, noted S&P Global.

"While businesses continued to report longer lead times, the deterioration in vendor performance eased a modest rate that was the softest since January 2020, which firms attributed to reduced pressure on suppliers which allowed them to carry enough stock to fulfil production requirements.

"That said, delays were still hindering purchasing activity, which stagnated for the second time in three months. Moreover, the struggle for firms to receive certain key inputs for production contributed to moderations in both stocks of purchases and finished items."

On the price front, input costs increased for the 27th month running in August, reflecting higher raw material and transportation prices. Positively, the rate of inflation eased for the second successive month to reach the lowest since September 2021, as firms reported lower prices for a wide variety of inputs, most notably including oil.

S&P Global said manufacturers partially passed these savings through to clients, as output charges increased at the softest rate for 12 months.

Looking ahead, S&P Global said Malaysian manufacturers remained optimistic regarding the year-ahead outlook for output amid hopes demand conditions would continue to improve as the pandemic was brought fully under control. "The overall level of confidence rose to a seven-month high as a result."

The S&P Global Malaysia Manufacturing PMI is compiled from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The PMI is a weighted average of the following five indices: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%).

Edited ByKang Siew Li
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