Malaysia's manufacturing activity is predicted to continue to increase in the coming months following the latest data showing a modest decline in the manufacturing sector over a period of one and a half years.
The seasonally adjusted manufacturing Purchasing Managers' Index (PMI) rose to 49.5 in February, the highest level since September 2022. A reading above 50 indicates development in manufacturing activity and a reading below is the opposite.
According to the Public Investment Bank, Malaysia's purchasing managers' index is likely to reflect true global trends. Expected growth in the global semiconductor market coincides with an important period for Malaysia's manufacturing sector.
Shipments of electrical and electronic products including semiconductors usually account for 40% of Malaysia's total gross exports.
Manufacturing activity in Malaysia has mostly lagged behind other manufacturing hubs in Asia including South Korea and Taiwan which are recovering amid a slowdown in China. In Southeast Asia, Singapore and Vietnam have risen earlier.
China's manufacturing sector has contracted for the fifth consecutive month with the PMI falling to 49.1 in February. In contrast, the Caixin-Markit Manufacturing PMI which focuses more on smaller private enterprises edged up to 50.9.
The increase in Malaysia's manufacturing PMI signals a more expansive foreign trade performance in the coming months. Regional trade, particularly Asia, may remain on an upward trajectory.
MIDF said it is optimistic that Malaysia's foreign trade will recover steadily this year with exports growing 5.2% this year and supported by increasing global demand and stable commodity prices.
S&P Global, which compiled the Malaysia PMI survey said the data showed that both gross domestic product and manufacturing output were set to be positive in the first quarter of 2024.
Exports of manufactured goods are expected to grow 5.5% this year following a 5.3% contraction in 2023 according to official forecasts. Overall, the government projects economic growth to increase to 4.0%-5.0% this year from 3.7% in 2023.
