KUALA LUMPUR (June 3): Malaysia’s manufacturing sector continued to experience challenging conditions in May 2025, marking a sustained period of subdued activity midway through the second quarter, according to a S&P Global statement on Tuesday.

Both production levels and new orders saw ongoing moderation, reflecting a persistent softness in operating conditions. 

While the rates of reduction in output and new business eased slightly, indicating a modest improvement, the underlying weakness remains a concern.

“The imposition of US tariffs added to manufacturers’ cost burdens, as input price inflation reached the highest for six months. Looking ahead, business confidence moderated on the month during May, with the overall degree of sentiment at the lowest since June 2021,” read the statement.
The S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) registered a slight increase from 48.6 in April to 48.8 in May. 

Although this indicates a softer moderation, it still signifies a continuous contraction in the manufacturing sector for the twelfth consecutive month. 

Production levels have now been scaled back consistently for a full year, with muted new order inflows being a primary driver for the decrease in output.

A significant challenge for manufacturers was the impact of US tariffs, which contributed to an uptick in cost burdens. Consequently, input price inflation accelerated, reaching its highest level in six months.

This modest rise in expenses represents the highest since last November, indicating a notable increase in operational costs for businesses. Despite these rising input costs, firms maintained stable prices for their products in May, breaking a four-month streak of price reductions.

Total new orders contracted for the third consecutive month in May. Manufacturers reported weak client confidence in both domestic and international markets, leading to a sixth successive monthly decline in new export orders, albeit at the slowest pace since February. 

Employment levels in the Malaysian manufacturing sector remained unchanged in May, halting a seven-month period of job shedding. 

However, subdued new order inflows allowed firms to continue processing outstanding business, resulting in a marginal decrease in backlogs. 

Purchasing levels also saw a reduction, though at the slowest pace since February, as firms maintained cautious inventory holdings for both inputs and finished goods.

Business sentiment, while still positive for the coming year due to hopes of improved demand, moderated significantly in May, reaching its lowest point since June 2021. 

This decline in confidence was largely attributed to ongoing concerns regarding the future trajectory of US trade policy, and a shortage of suitably skilled workers. 

This suggests that despite some minor improvements in the rates of decline, business sentiment is at its lowest since June 2021, highlighting a pervasive sense of uncertainty among manufacturers.