Overview

• The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) slipped from 49.5 in October to 49.2 in November, reflecting subdued demand conditions. Declines were observed in new orders, output, and inventories, while employment levels remained largely unchanged. 

Details 

• During the surveyed period, new orders declined for the fourth time in five months, reflecting subdued demand. While the reduction was modest, it was the sharpest since April. Conversely, international markets demonstrated resilience, with new orders growing for the eighth consecutive month in November, a trend firms frequently attributed to robust demand across the Asia-Pacific region. Aligning with the overall trend in new orders, production also softened at a modest pace. However, the rate of decline showed a slight improvement compared to the previous survey month. This suggests that, in the near term, industrial production will remain supported by the strong performance of export-oriented industries. 

• Moreover, purchasing activity, stocks of inputs, and inventories of finished goods were all reduced in November 2024. However, the pace of decline for each measure moderated compared to the previous month, signaling a slight easing in supply chain adjustments. 

• Concurrently, employment levels were reduced during the latest survey period, as firms opted not to replace voluntary leavers. At the same time, Malaysian manufacturers reported a broad stabilisation in backlogs of work, with the seasonally adjusted index reaching its highest level in four months. Firms frequently noted that limited capacity had exerted some strain on operations, contributing to the elevated backlog levels. 

• On a positive note, input cost inflation eased further in November, reaching a nine-month low. While the overall increase in costs remained solid, it was primarily attributed to higher raw material prices and a weaker exchange rate. Meanwhile, factory gate inflation for manufactured goods was minimal, as firms strategically reduced prices to stimulate demand and boost sales. 

Outlook 

• The average reading for the first eleven months of the year remained resilient, indicating sustained improvement in manufacturing sector growth in 2024. The average PMI for 11M24 stood at 49.4, showing a significant improvement compared to 47.8 in 2023. 

• Further insights from S&P Global revealed that the PMI data suggests Malaysian manufacturers faced continued pressure in November, driven by a slight intensification in the moderation of operating conditions. New orders, output, and employment all showed signs of softness, with new business easing at the sharpest pace in seven months. However, the historical correlation between the PMI and official GDP data indicates that Malaysia is likely to experience continued growth in the final quarter of 2024 (TA 4Q24 forecast: 4.7% YoY; 3Q24: 5.3% YoY). Quarter-to-date, the PMI stands at 49.4, slightly lower than 3Q24's 49.6. 

• Looking ahead, optimism about the 12-month outlook for output in November was primarily driven by expectations of improved market demand. While the overall level of confidence remained stable compared to October, it continued to lag the long-run average of 56.2, reflecting lingering concerns about the timing and strength of a recovery in domestic demand.

Source: TA Research - 3 Dec 2024