KUALA LUMPUR: The seasonally adjusted S&P Global Malaysia manufacturing purchasing managers’ index (PMI) was unchanged at 46.8 in October, and signalled an easing of business conditions for the fourteenth consecutive month.
S&P Global Market Intelligence said the historical relationship between the PMI and official gross domestic product (GDP) data suggests that GDP is still set to improve modestly as we move into the final quarter of the year.
Looking at official data on manufacturing production, however, the PMI readings are indicative of a stagnation on a year-on-year basis.
"The latest S&P Global Malaysia Manufacturing PMI suggests that firms continued to struggle against the backdrop of demand weakness, both at home and abroad. The ongoing depletion of backlogs of work in order to support output reached its peak in October, with outstanding business cleared at an unprecedented pace. We will therefore need to see greater inflows of new work in the months ahead if manufacturers are to be able to maintain production schedules.
"There were further signs of a pick-up in cost inflation in October, but we are still not seeing prices increase at anything like the pace we did in the three years following the Covid-19 pandemic. In fact, with demand remaining muted, firms raised their own selling prices only slightly over the month,” S&P Global economics director Andrew Harker said in a statement.
S&P Global said Malaysian manufacturers experienced a challenging business environment again at the start of the final quarter of 2023 as demand conditions continued to wane.
It noted that new orders moderated and production was scaled back. Employment also eased, but firms were still able to deplete backlogs of work to the greatest extent since the survey began in July 2012.
Meanwhile, currency weakness and higher raw material prices added to firms' input costs, but the rate of inflation was relatively muted. Likewise, selling prices increased only slightly during the month.
S&P Global said the latest PMI survey pointed to a further moderation of manufacturing output, the fifteenth in as many months. The pace at which production eased was marked and the fastest since January.
It said respondents largely attributed the latest easing in production to weak demand conditions both domestically and internationally.
“This anecdotal evidence was consistent with data covering total new orders and new export business, both of which saw a sustained slowdown in October,” it said.
“With new orders softening, manufacturers were able to transfer spare resources to work on outstanding business. Backlogs of work subsequently fell sharply over the month, and to the largest degree in the survey's history,” it added.
