Friday 29 Mar 2024
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KUALA LUMPUR (Feb 1): The Asean manufacturing sector witnessed an improvement in January after two months of contraction, largely driven by a modest rise in production levels and new orders, leading to the 16th consecutive month of improvement in overall manufacturing conditions.  

However, Malaysia was the only country with a notable deterioration in its manufacturing conditions, as the pace of contraction accelerated for the fourth month running, according to S&P Global’s latest purchasing managers index (PMI) survey. 

S&P said Malaysia’s latest PMI reading of 46.5, a dip from 47.8 in December 2022, was the lowest recorded in 17 months. 

These findings suggest a mixed picture of the sector, where most firms raised their purchases of inputs to meet growing demand and at the quickest rate for three months.  

“The headline PMI picked up from 50.3 in December to a three-month high of 51. That said, the rate of expansion remained muted in comparison to last year’s average,” it said.  

In a separate note, S&P Global said Malaysia's output levels were scaled back for the sixth successive month, and at the fastest pace since September 2021, while the rate of reduction in new order inflows was the most pronounced for 17 months. 

“[Malaysian] firms often commented that domestic and global economic weaknesses had weighed on production and demand," it said.  

S&P Global Market Intelligence economist Usamah Bhatti said the latest PMI data for Malaysia is still indicative of growth in official data heading into the new year, though at a softer rate. 

"Two positives came from the latest survey result, the first being 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," she said. 

“The second was the first reduction in delivery times for just over three years as material shortages, port congestion and delivery issues continued to normalise. Better availability of materials also contributed to the softest rise in input prices in the current sequence of inflation that began in June 2020." 

S&P Global said employment levels in Malaysia’s manufacturing sector rose for the first time in four months. The time taken to receive inputs also shortened for the first time since November 2019. 

“As a result, input prices rose at a modest pace that was the slowest in the current 32-month sequence of inflation," it said.  

Usamah said inflation in Asean remains elevated, and further rate hikes in the region could be expected. Thus, she said it is vital that demand conditions continue to recover and are able to support growth momentum into the rest of 2023. 

For Malaysian manufacturers, S&P Global said they were increasingly optimistic regarding the year-ahead outlook for output amid hopes that both domestic and external demand conditions would improve as the global economy recovers.  

It said the overall level of confidence by Malaysian manufacturers rose to the strongest since August 2019. 

Edited ByIsabelle Francis
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