Bimb Research Highlights

Malaysia Economy - Modest Growth in Manufacturing Sales

Publish date: Tue, 14 Mar 2023, 04:27 PM
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Bimb Research Highlights
  • Manufacturing sales value recorded a modest 6.5% YoY growth to RM148.0bn
  • Manufacturing sector employment rose by 3.0% YoY
  • Productivity slowed to 3.4% YoY in January
  • Manufacturing sales will continue to grow albeit at a slower pace

The sales value of the Manufacturing sector rose modestly by 6.5% YoY to RM148.0bn in January 2023. The continuous positive momentum was fortified by the double-digit growth in Transport equipment & other manufactures (14.0%) and Petroleum, chemical, rubber & plastic products (10.1%) sub-sectors, sub-sectors, particularly in the Manufacture of motor vehicles, trailers & semi-trailers; and the Manufacture of coke & refined petroleum products industries respectively. Nonetheless, the sales value registered in January 2023 was the lowest recorded since May 2022.

On MoM basis, the sales value shrank by 5.4% while seasonally adjusted sales value contracted 3.9%.

The sales value of export-oriented industries which contributed 71.3% of total sales, posted a slower growth of 6.9% YoY in January 2023 as against 9.2% YoY recorded in December 2022. The moderate performance was also in line with the deceleration in exports of manufactured products during the month. A similar trend was recorded in the domestic-oriented industries’ sales value which moderated to 5.6% YoY from 7.7% YoY growth in the preceding month. In comparison with the previous month, sales value for export-oriented industries continued to decline for four consecutive months, registering a negative 6.9% MoM in January 2023, while domestic-oriented industries dipped by 1.6% MoM.

Employment growth in manufacturing sector remains strong. There were 2.34mn persons engaged in the Manufacturing sector in January 2023, increased by 3.0% YoY as against 2.27mn persons registered in January 2022 (Dec’22: 3.4%). The increment was mainly attributable to the rise in the number of employees in the Food, beverages & tobacco products (4.7%); Electrical & electronic products (4.3%); and Petroleum, chemical, rubber & plastic products (2.1%) sub-sectors. On MoM basis, the number of employees rose 0.3% from 2.34mn persons which registered in the previous month.

Resembling the positive trend in employment, the salaries & wages paid in the manufacturing sector rose 4.0% YoY or RM317.6mn, totalling RM8.18bn in January 2023. Meanwhile, total salaries & wages paid declined 4.4% MoM (RM378.6mn). The average monthly salaries & wages per employee of RM3,494, posted an increase of 1.0% YoY. However, on month-on-month basis, average salaries & wages paid per employee decreased by 4.7%

In addition, productivity or sales value per employee recorded a value of RM63,200 which grew by 3.4% YoY. On the other hand, the average sales value per employee shrank 5.7% as compared to December 2022.


Manufacturing sales experienced another month of moderation, growing at 6.5% YoY which was the weakest annual growth since August 2021, which was attributable to slower monthly sales which dropped -5.4% MoM, with the seasonally-adjusted sales value contracted 3.9%, decreasing to RM144.8bn which was the lowest in 11 months.

Malaysia’s manufacturing sector has shown signs of positive momentum in February 2023, with the Malaysia manufacturing PMI rising to 48.4 from 46.5 in January, recording its highest reading in four months. Meanwhile, the February manufacturing PMIs point to a welcome return to growth for global industry after six months of decline, as the global manufacturing PMI rose to 50.0 in February (Dec-22: 49.1). While the latest February PMI prints raised hope that the worst of the manufacturing downturn may be over, we are cautious and think it is too early to jump to such a conclusion as most of the sub-indices within the Malaysia PMIs remained in contraction territory. Malaysia’s exports posted the smallest gain since October 2020 at 1.6% YoY in January, the fifth straight month of growth slowdown, as external demand for manufactured goods declined. Shipments of manufactured goods dropped for the first time in 32 months by 0.1% YoY (Dec: +4.6%).

Manufacturing operating conditions are improving thanks to the easing in external headwinds particularly from China. The positive will be visible in the coming months, and we still expect manufacturing sales growth to remain on a positive expansion albeit at a slower pace, given the lingering macro headwinds and year-ago high base effects. The nation’s manufacturing PMI reading and exports indicates a further slowdown in the manufacturing activities as challenging conditions limited demand from both domestic and international markets.

Source: BIMB Securities Research - 14 Mar 2023

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