KUALA LUMPUR (March 1): There were signs of positive momentum building in the Malaysian manufacturing sector midway through the opening quarter of 2023.

S&P Global in its Malaysia manufacturing purchasing managers index (PMI) note on Wednesday (March 1) said that data on output and new orders signalled a much-improved situation compared to January, prompting a near-stabilisation of purchasing activity and the maintaining of workforce numbers.

It said a desire among firms to deplete backlogs of work was also noted.

Suppliers’ delivery times shortened again, and to the greatest extent in close to a decade, while inflationary pressures remained relatively muted.

The seasonally adjusted S&P Global Malaysia manufacturing PMI rose to 48.4 in February from 46.5 in January, and posting its highest reading in four months.

The index has now, however, pointed to six consecutive months of challenging business conditions.

The relative improvement in the data from the January survey suggests that official numbers for GDP and manufacturing production will continue to show year-on-year expansions, following slowdowns in the rates of growth shown by recent official data releases.

Signs of improvement in sector performance were evident with regard to both output and new orders in February, which both moderated to a much lesser extent than in January.

While firms reported that customer demand remained subdued, total new orders eased to the least extent in four months.

New export orders, meanwhile, continued to slow amid fragile international demand.

Subsequently, manufacturing production was scaled back at the slowest pace since August last year, as some firms responded to signs of improvement in market demand by expanding their production volumes.

There were widespread reports of manufacturers wanting to clear backlogs of work in February.

These efforts were generally successful as outstanding business decreased to the largest extent since July 2017. Contracts were often fulfilled, thanks to the use of stocks of finished goods, which were depleted for the eighth month running, and at the joint-sharpest pace since March last year.

As part of efforts to keep on top of workloads and get ahead of predicted future price increases, manufacturers posted a near-stabilisation in purchasing activity during February, a marked turnaround from the decline posted in January.

The recent run of lower purchasing meant that stocks of inputs continued to moderate, however.

Firms also looked to maintain their staffing levels, posting broadly no change in the latest survey period following a slight increase in the previous month.

Efforts to hire more staff to support output were sometimes cancelled out by voluntary resignations.

Increased staffing numbers at suppliers and a reduction in port congestion helped lead to the most pronounced shortening of suppliers’ delivery times in close to a decade.

S&P Global Market Intelligence economics director Andrew Harker said there were reasons for optimism provided by the latest PMI survey for Malaysia, with signs that the recent soft patch may be coming to an end.

He said both output and new orders moderated to much lesser degrees than was the case in January, with firms looking to maintain their purchasing activity and workforce numbers.

“Operations are being helped by an improving supply-chain environment, with suppliers’ delivery times quickening to the greatest degree in almost a decade, as some of the difficulties of the past couple of years subside.

With inflationary pressures also muted, we will hopefully see further improvements in demand and production in the months ahead.”