KUALA LUMPUR (Sept 2): The Malaysian manufacturing sector showed signs of stabilisation in August, as a renewed increase in new orders spurred the first rise in production in over a year, according to the latest S&P Global Purchasing Managers’ Index (PMI) data. 

However, the fragile recovery was clouded by weakening business confidence and moderating employment levels.

The seasonally adjusted PMI rose slightly to 49.9 in August this year, up from 49.7 in July, marking the highest reading in 14 months and signalling a broad stabilisation in operating conditions. 

“Given the historical relationship between the PMI and official GDP (gross domestic product) data, the latest figures suggest that GDP growth seen throughout 2025 so far was maintained into the third quarter, while also pointing to sustained year-on-year improvements in official manufacturing production,” the statement read.

Supporting this positive trend, export demand remained positive for the second consecutive month.

“That said, some firms raised concerns regarding how long this recovery would continue, as there was a further reduction in employment levels in the latest survey period. 

“Moreover, the degree of confidence in the 12-month outlook for production waned from July and was the lowest in over four years.”

However, despite improved demand, employment levels moderated further in August.

Althought the survey recorded a sustained fall in staffing numbers, the most marked since October 2023, companies indicated that they currently possess sufficient capacity to handle orders.

Notably, there was further reduction in backlogs of work, though at the softest rate in three months and to fulfil new orders, firms also further reduced their stocks of finished goods from existing inventories.

In a positive supply-chain development, vendor performance stabilised in August, following two consecutive months of lengthening delivery times.

Meanwhile, some firms reported softer pressure on suppliers, though others noted ongoing shipping delays.

Regarding inflation, input cost pressures persisted but rose at a slower pace year-on-year in August as manufacturers cited rising raw material prices and the impact of tariffs as key drivers.

Despite moderating input costs, firms raised their output charges at a solid rate, and the pace of increase in selling prices was the joint-strongest since August 2024.

Looking ahead, business confidence regarding the year-on-year outlook for production weakened from July, with the degree of optimism recorded being the lowest in over four years.

While some hope was tied to the recent upward trend in new orders, widespread concerns about the global economic outlook remained.