KUALA LUMPUR (Sept 17): Malaysian manufacturers are bracing for a challenging second half of 2025 (2H2025), with expectations of a negative tilt in profit and lower demand, according to the latest survey of the Federation of Malaysian Manufacturing (FMM).
The survey, which polled 627 manufacturers nationwide from July 2 to Aug 15, found a general dimming of the business outlook, with all forward-looking indices showing a decline from a previous survey.
Profit expectations are particularly concerning, with 47% of respondents forecasting lower profits in 2H2025, as opposed to only 32% expecting an increase, due to the dual pressure of ongoing cost pressures and weaker demand.
Revenue expectations are fragmented, with 39% of respondents projecting increase in revenue, while 34% anticipate declines and 27% expect stability.
Cost of production remains a key challenge, with the index staying elevated at 163, only a slight dip from 167 in the first half of 2025. A significant 69% of respondents anticipate higher input costs in the coming months.
Expectation for general activity softened, with the index losing 12 points to 89 in 2H2025, from 101 in 1H2025. Only 23% of the respondents are looking forward to an improvement in business conditions, while 34% are expecting declines; 44% anticipate things to remain largely unchanged.
The index for expected local sales fell nine points to 83 from 94 in 1H2025, with 36% of those who sell domestically projecting lower sales — as opposed to only 19% anticipating an increase — suggesting that domestic demand conditions remain under pressure.
Similarly, expected export sales dropped 13 points to 84 from 97, weighed by ongoing trade uncertainties. A higher proportion of exporters, at 37%, anticipate declines in sales, up from 26% previously.
In response to the challenging conditions, manufacturers are scaling back on production and capacity expansion. The production volume index eased 18 points to 91 from 109 in 1H2025, with 34% anticipating declines in output, up from 21% in the last survey; only 26% are expecting higher output, down from 32% previously.
Capacity utilisation is expected to ease in tandem, due to weaker operating conditions and firms focusing on efficiency rather than expansion. The capacity utilisation index declined 16 points to 90 from 106. The proportion of respondents planning to cut capacity has risen to 34% from 22%, while those planning to increase their capacities dropped to 24% from 27%.
The latest expected index for capital investment, while remaining within the optimism threshold at 106, has lost eight points from the previous survey’s 116. The proportion of respondents expecting a decline in investments rose to 20% from 16%, while 28% are projecting higher investments.