Wednesday 24 Apr 2024
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KUALA LUMPUR (Dec 1): November saw further moderation in the Malaysian manufacturing sector, as demand conditions remained subdued. That said, there were some tentative signs of improvement, resulting in less pronounced slowdowns in new orders, output and employment, while business confidence reached a seven-month high.

In a statement on Friday, S&P Global Market Intelligence said rates of inflation of both input costs and output prices ticked higher, often as a result of weakness in the ringgit against the US dollar, but they remained relatively muted.

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

The reading therefore signalled a muted moderation in the health of the sector.

The historical relationship between the PMI and official gross domestic product data indicated that the final quarter of 2023 will see continued growth, with the magnitude of the expansion likely to be similar to the 3.3% year-on-year increase posted in the third quarter. Meanwhile, the data was consistent with broadly unchanged official manufacturing production numbers on an annual basis.

New orders eased for the 15th month running in November, amid weak demand, including in international markets.

That said, there were some reports of customers' new orders showing tentative signs of improvement, resulting in the softest slowdown in new business since August.

These signs that demand may be starting to strengthen were fed through different indicators of the latest survey, translating into softer moderations in output, employment and purchasing activity.

In line with the picture for new orders, production softened to the least extent in three months, but the rate of moderation remained solid, nonetheless.

Meanwhile, employment neared stabilisation, easing to the joint-softest degree in the current seven-month sequence of reduction. Where staffing levels moderated, firms often linked this to resignations.

Manufacturers were again able to reduce their backlogs of work, given the muted demand environment, but the rate of depletion was much weaker than the series record posted in October.

Purchasing activity, stocks of inputs and inventories of finished goods were also scaled back again in November, but in each case to lesser extents than in the previous survey period.

Those firms that purchased items were faced with lengthening delivery times from suppliers midway through the final quarter of the year. Moreover, the deterioration in vendor performance was the most pronounced since September 2022.

The rate of input cost inflation ticked up to a one-year high, amid currency weakness and higher prices of raw materials globally.

The rate of inflation remained softer than the series average, however. Output price inflation also remained relatively muted in November, but higher costs still meant that firms increased their charges for the fourth consecutive month.

The tentative signs of improvement in demand seen in November, and hopes that these will continue in the year ahead, supported optimism in the 12-month outlook for manufacturing production. In fact, sentiment strengthened slightly to the highest since April.

S&P Global Market Intelligence economics director Andrew Harker said that although Malaysian manufacturers remained under pressure in November, the latest PMI data provided tentative signs that the sector may be turning a corner.

He said new orders moderated to a lesser extent, and this fed through to softer slowdowns in output, purchasing and employment, the latter of which was close to stabilisation during the month.

"Business confidence also picked up, suggesting that these nascent improvements have the potential to be sustained into 2024. Firms will be hoping that this is the case, and that demand can start to strengthen to an extent, so that meaningful growth can be recorded in the not-too-distant future,” said Harker.

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