Friday 29 Mar 2024
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KUALA LUMPUR (Nov 1): The Malaysian manufacturing sector registered a further loss of momentum during October.

In a statement on Tuesday (Nov 1), S&P Global Market Intelligence said the sector slowdown was slightly stronger than in September and reportedly stemmed from sluggish global market conditions and muted customer demand.

It said firms subsequently scaled back output to reflect current demand trends and also downwardly adjusted inventory holdings and input buying.

Inflationary pressures continued to ease in October as signalled by the softest rate of selling price inflation in two years. Nevertheless, business sentiment across Malaysia's manufacturing sector remained firmly optimistic and broadly in line with the historical average.

The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) slipped from 49.1 in September to 48.7 in October.

The latest reading was indicative of a slight moderation in the health of the sector but one that was the strongest since September 2021.

The latest PMI reading is representative of approximately 5% year-on-year growth of GDP in Malaysia, which would signal some loss in growth momentum from the situation earlier in the year.

Similarly, the data are also consistent with a continued, albeit softer expansion in official manufacturing production.

Subdued demand conditions were reportedly pivotal to October’s loss of momentum.

For a second month running, new orders softened with anecdotal evidence suggesting that weak underlying demand conditions were a key driver of this.

Demand from overseas meanwhile moderated at the strongest pace in 16 months during the latest survey period.

S&P Global  said panel members indicated sluggish global market demand.

It said muted demand conditions across the Malaysia manufacturing sector led firms to scale back levels of production in October and for the third month running.

Moreover, the slowdown was the most marked since March and solid overall.

Following in the trend for output, Malaysian manufacturing firms lowered input buying and depleted stock levels at the start of the final quarter.

Firms reportedly utilised existing stocks to fulfil incoming orders, leading to a decline in post-production inventories that was the quickest in seven months.

At the same time, firms scaled back input buying for the second month in a row and pre-production inventories also moderated.

Meanwhile, spare capacity within the sector persisted, with backlogs of work depleted for the fifth consecutive month.

Anecdotal evidence suggested that the reduction in outstanding work was linked to subdued demand.

Malaysian goods producers registered a renewed scaling back of workforce numbers in October following a month of employment growth in September.

S&P Global said survey respondents attributed the drop in staffing levels to voluntary resignations rather than layoffs.

More positively, latest survey data displayed further signs of easing supply pressures in October.

The latest lengthening of suppliers’ delivery times was the softest since January 2020 and mild overall.

S&P Global Market Intelligence economist Laura Denman said the latest S&P Global PMI data for the Malaysia manufacturing sector pointed to a further loss in growth momentum at the start of the final quarter.

She said anecdotal evidence suggested that demand conditions were subdued which led firms to scale back output.

“Sluggish demand was particularly apparent on an international level, as signalled by the strongest moderation in new export orders since June 2021.

"On a more positive note, pricing and supply pressures alleviated further in October. Both input cost and output price inflation softened markedly from September, dipping to 23 and 24-month lows, respectively.

“At the same time, the rate of deterioration in vendor performance was the slowest since January 2020, helping to alleviate some of the headwinds that firms have faced in recent years,” she said.

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