KUALA LUMPUR, Oct 2 — Malaysia’s manufacturing continued to contract in September, signalling further challenges for firms in the sector in 2023, according to the latest report from S&P Global Market Intelligence released today.
The financial analytics firm said the seasonally adjusted Manufacturing Purchasing Managers’ Index (PMI) score of 46.8 — down from 47.8 in August — also showed that manufacturing new orders moderated for the 13th month running.
Demand has dropped, it noted, adding that last month’s slowdown is the sharpest since January.
“Malaysian manufacturers continued to endure a challenging time at the end of the third quarter, with reports of demand weakness widespread in the latest PMI survey, causing stronger moderations in output, new orders and exports.
“Although the latest figures are still representative of growth in official GDP numbers, the current soft patch looks set to continue over the coming months.
“Data for the level of outstanding business signalled one of the steepest depletions in backlogs in the series history amid a sustained lack of new orders.
“Reflecting the weakness, firms are increasingly cautious regarding spending, pulling back on input purchases, stock holdings and employment levels,” Usamah Bhatti, economist at S&P Global Market Intelligence, said in a statement accompanying the report.
The firm said the latest findings indicate the subdued demand environment is not limited to just the domestic market.
It said new export orders are the softest since May 2020.
It said the weak demand has also fed into stocks as both input purchases and pre-production inventories were scaled back to the greatest extent for two years, while holdings of finished items were reduced at the quickest pace since July 2021.
As such, it said supplier performance positively moved closer to stabilisation following a marginal deterioration in the previous survey period.
S&P Global said the data also revealed employment moderated for the fifth month in a row in September, with lower workloads and staff resignations cited as the main reasons for reduced staffing levels.
Spare capacity was also evident, with backlogs of work reducing for the 16th consecutive month, and at the steepest rate since July 2017.
Nevertheless, S&P Global said Malaysian manufacturers are increasingly optimistic that the current demand weakness would fade, with the overall degree of optimism reaching the highest since May.
“Positive sentiment was commonly attributed to hopes for an improved demand environment that would promote new order inflows and business opportunities.
“That said, firms cited uncertainty regarding the timing of the recovery,” it said in a statement.