Malaysia's manufacturing sector is experiencing mixed growth and challenges, according to the latest Purchasing Managers' Index (PMI) data.
July 2024 manufacturing PMI decreased to 49.7 points from 49.9 in June, indicating contraction in the sector for 2 consecutive months.
Although the sector is expected to continue growing in the second quarter of 2024, the growth rate may slow slightly. Weak domestic demand led to the first easing of new orders in three months, although the reduction was small.
In contrast, international markets, particularly in Asia and Oceania, have shown robust performance for the fourth month in a row, highlighting the importance of export markets.
Output levels fell to their highest level in three months, and employment saw a slight reduction due to a lack of workers due to not replacing voluntary layoffs.
The problem caused the backlog to increase for the first time since May 2022, indicating capacity pressure.
Firms reduce purchasing and inventory activities, aligning inputs with actual demand to avoid overstocking.
Manufacturers faced longer delivery times due to severe port congestion, contributing to rising input cost inflation, which hit an eight-month high in July.
As a result, firms raised prices at their steepest rate since September 2022 to offset higher raw material and transportation costs.
Despite these operational challenges, there is cautious optimism about future demand growth over the next 12 months, with confidence levels at their highest level since March.
However, concerns about the timing of domestic demand recovery remain. Economist Usamah Bhatti noted that Malaysian manufacturers are under pressure, with new orders, output and employment weakening, largely in the domestic market.
Nevertheless, increasing export orders and inflationary pressures indicate continued resilience and adaptability in the sector.
