Manufacturing sector on gradual recovery path, say economists


PETALING JAYA: The manufacturing sector is expected to be on a gradual recovery path in the immediate term, according to economists.

This anticipation is based on the country’s latest manufacturing purchasing managers’ index (PMI) reading by S&P Global Market Intelligence, as well as the latter’s survey that shows improving optimism among manufacturers in the country.

In its report, Kenanga Research said the recent uptick in manufacturing PMI suggested a possible resurgence in the health of the manufacturing sector as the year draws to close, with positive momentum extending into 2024.

“This is partly attributed to the potential upswing in the technology sector and China’s gradual recovery, both of which are expected to contribute to an improvement in Malaysia’s export performance moving forward,” the brokerage said yesterday.

The seasonally adjusted S&P Global Malaysia manufacturing PMI rose to a seven-month high of 47.9 in November, up from 46.8 in October.

Data also showed manufacturers’ optimism in the country surged to the highest since April 2023.

“While the index continues to signal contraction by remaining below the neutral threshold of 50 points, it has risen to a seven-month high, indicating a potential upturn in manufacturing activity in the near future.

“Overall, the ongoing slowdown is due to weak demand from domestic and international market,” Kenanga Research explained.

“We forecast that gross domestic product (GDP) growth will continue to expand in the final quarter, reaching 3.7%, versus 3.3% in the third quarter, primarily driven by a resilient domestic demand, bolstered by year-end festive spending and a rise in tourist arrivals.

“Additionally, the growth would also be supported by increased fiscal spending, as the government typically ramps up spending towards the year’s end,” it pointed out.

Overall, Kenanga Research expects 2023 GDP growth to be at the upper end of its projected range of 3.5% to 4%, before growing further to 4.9% in 2024.

Meanwhile, MIDF Research said in its note that the better PMI reading and improved manufacturers’ optimism last month reflected a more positive outlook for the sector.

“This is also aligned with our expectations for recovery in the trade and production activities, improving from low levels.

“On that note, we continue to expect Malaysia’s exports of goods will pick up and rebound in 2024,” it explained.

According to TA Research, the tentative indications of improved demand witnessed in November, coupled with optimistic expectations for the upcoming year, had bolstered confidence in the long-term prospects of manufacturing production.

“While overseas demand continues to hover at a moderate level, the upswing in business confidence implies that these emerging positive trends may carry forward into 2024,” it said.

“Companies participating in the survey are anticipating and, indeed, hoping for the sustained continuation of these positive developments.

“The aspiration is that demand will gradually strengthen, paving the way for meaningful growth in the not-too-distant future,” it added.

For the 11 months of 2023, the average PMI remained modest at 47.7, as compared to 49.8 a year ago. Malaysia’s GDP grew 8.7% in 2022.

PMI , manufacturing , GDP

   

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