KUALA LUMPUR (June 5): The latest Purchasing Managers' Index (PMI) data indicates that Malaysia's manufacturing sector is on course for a broader recovery in the second half of this year, but prolonged disruptions in the supply chain from geopolitical issues could pose a challenge, said economists.

Additionally, confidence levels have eased despite the positive sentiment among Malaysian manufacturers and expectations of higher output in the coming year. This has impacted manufacturers' willingness to acquire input inventories, they said.

Recent data from S&P Global showed that Malaysia's manufacturing PMI climbed to 50.2 in May — marking the first expansion since August 2022 — compared to 49.0 in the previous month, driven by a resurgence in new business and production activities.

The global manufacturing PMI rose to a 22-month high of 50.9 in May, while the Asean manufacturing PMI printed a 13-month high of 51.7 in May.

HSBC Global Research said that the increase in Malaysia's monthly export orders is encouraging, as the country has recently lagged behind other major exporters like Korea and Taiwan in export recovery.

This lag was attributed to Malaysia's semiconductor sector not being in the segments of the chip supply chain boosted by the AI-driven tech upcycle.

Looking ahead, MIDF Investment Bank anticipates that Malaysia's outbound shipments of manufactured goods, including electrical and electronics (E&E), refined petroleum, chemicals, and machinery and equipment, will expand faster in the second half of 2024.

“Also, we expect steady expansion of palm oil and mining exports amid stable global commodity prices. On that note, we reiterated our expectation for exports of goods to rebound and expand by +5.2% in 2024, compared to -8.0% in 2023,” said the research house.

Public Invest Research, meanwhile, said that Malaysia's PMI is set to converge with global trends, consistently exceeding the 50-level mark throughout 2024, contingent upon stabilisation of global uncertainties.

“Malaysia's manufacturing sector is poised for positive growth in 2024, supported by promising global semiconductor market projections. Overall sentiment remains positive, with firms forecasting increased output over the coming year.

“However, the softening in confidence has dampened manufacturers' willingness to expand input inventories. These trends necessitate close monitoring for further signs of a sustained recovery,” it added.