KUALA LUMPUR (March 2): The Malaysian manufacturing sector experienced a slowdown midway through the first quarter of 2026, shifting from the improvement recorded at the start of the year, according to S&P Global.

The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) fell below the neutral 50.0 mark in February, posting 49.3, down from a 20-month high of 50.2 in January. 

"Although slight, the pace of the slowdown was the most marked since June 2025. Overall, the latest reading signals an annual GDP growth of just under 5%, according to historical comparisons," said S&P Global in a statement on Monday.

According to S&P Global, the latest reading signalled a moderation in the health of the sector for the first time in four months.

"Underpinning moderation within the sector were renewed slowdowns in new orders and output. The impact on purchasing activity was limited, with firms raising their input buying but at a slower pace. 

"However, a joint-record easing in staffing numbers was one of the key takeaways from the latest survey. The only other time when payroll numbers have been scaled back to such an extent was during August 2020," read the statement. 

Despite a second straight month of growth in new export orders, the total new sales dropped as the pace of increase in exports softened on the month. The weakness meant that while firms raised their purchasing activity again, the pace of growth was marginal and softened on the month.

The report noted that production forecasts across Malaysian manufacturers remained optimistic, with firms hopeful that improved demand conditions will feed through to output growth.

On the price front, operating expenses rose modestly in February due to higher raw material costs, following the first decrease in input costs for 68 months during January. 

However, a challenging demand environment meant that firms chose to give discounts, resulting in output prices falling for the first time in four months. 

Finally, backlogs of work recorded a fresh rise for the first time in 19 months, even as firms continued to report longer delivery times due to port congestion and customs delays.

Despite this challenging demand environment, production forecasts remained optimistic, although the historically elevated level of confidence moderated slightly from January.