KUALA LUMPUR (May 2): Latest data signalled further downbeat trends across the Malaysian manufacturing sector at the start of the second quarter of 2024.

In a statement on Thursday, S&P Global Market Intelligence said that while demand remained generally subdued, there were slight indications that firms were on an upward trajectory, as firms scaled back production at a softer rate amid a slower reduction in new order inflows.

Moreover, the firm said employment levels stabilised in April, ending a three-month sequence of job shedding.

It said that on the price front, input price inflation was little-changed on the month and contributed to a renewed increase in output prices, though the rate of charge inflation was only marginal.

The seasonally adjusted S&P Global Malaysia manufacturing purchasing managers’ index (PMI) rose to 49.0 in April, up from 48.4 in March, to indicate a softer downturn in the Malaysian manufacturing sector.

The latest PMI data suggest that gross domestic product growth is running at a slightly improved rate than that seen at the end of 2023, as well as pointing to modest year-on-year improvements in official manufacturing production data.

Manufacturers often noted that demand in the sector remained muted during April, with reports of weak customer confidence.

Total new business moderated for the 20th consecutive month, though the rate of reduction eased from March.

Demand conditions in international markets, meanwhile, improved for the first time in a year and at the strongest rate since April 2021.

With customer demand remaining broadly subdued, manufacturers scaled back production for the 21st month in a row.

That said, the moderation eased from March and was only mild.

At the same time, stocks of finished goods were wound down further as firms used existing stocks to fulfil orders.

As market conditions showed some signs of recovery, Malaysian manufacturers reported stable employment levels in April, following three consecutive monthly falls.

S&P Global Market Intelligence said manufacturers signalled that they had sufficient capacity as the level of outstanding business fell once again in April, extending the current sequence of depletion to 23 months.

Firms operating in the Malaysian manufacturing sector signalled a solid rate of input cost inflation at the start of the second quarter.

Anecdotal evidence suggested that raw material prices had risen, notably due to exchange rate weakness.

In response, output charges were raised for the eighth time in nine months, following no change in March.

In line with the trends for new orders and production, purchasing activity was scaled back at a softer rate in the latest survey period as the muted picture for new business weighed on input purchasing decisions.

In turn, stocks of purchases also decreased, and at the steepest rate in 2024 so far, as some companies mentioned using existing stockpiles for production.

There was an improvement in vendor performance during April.

The extent to which delivery times were shortened was marginal, yet the most marked since last May.

Where lead times decreased, manufacturers mentioned more timely deliveries of inputs.

Hopes that new orders will return to growth territory support confidence that production will rise over the coming 12 months.

That said, the current muted demand environment meant that the degree of optimism eased from March to reach an eight-month low.

S&P Global Market Intelligence economist Usamah Bhatti said that despite the latest PMI data suggesting that demand conditions in the Malaysian manufacturing sector remained muted at the start of the second quarter of 2024, the data appear to be on the up and are still consistent with modest growth in the official statistics.

"Evidence is currently pointing to demand conditions moving on an upward trajectory, given the softer moderations in production, new business and purchasing.

“Better still, manufacturers will be buoyed by the renewed expansion in new export sales, with the rate of growth the strongest recorded in three years.

"The outlook towards output over the coming year also remained positive in April; however, the overall degree of confidence waned to the lowest for eight months.

“Firms often mentioned that they remained unsure regarding the timing and speed of any demand recovery, with downside risks centred around a muted global economy,” said Bhatti.

https://www.theedgemarkets.com/node/710054