KUALA LUMPUR (June 2): Malaysia’s manufacturing conditions deteriorated in May as decline in new orders weighed on production.

The seasonally adjusted manufacturing purchasing managers index (PMI) fell to 49.9 in May from 51.6 in April, according to S&P Global, which compiles the gauge. A reading above 50 points indicates activity expansion, while a reading below 50 signals contraction in the sector.

“The drop in the headline index in May reflected weakness in underlying demand conditions, with firms also noting that recent price hikes for goods had dampened sales growth,” S&P Global said.

The historical link between economic data and the PMI suggests a softening of growth midway through the second quarter, said Maryam Baluch, an economist at S&P Global Market Intelligence. 

Malaysia’s economic growth has decelerated in the first quarter as consumer spending and business investment decelerated amid the Iran war.

Inflation, meanwhile, has been gaining speed as protracted geopolitical conflict in the Middle East raised prices of everything from fuel to plastic packaging.

While some firms surveyed expanded their payrolls, the gains were offset by resignations, lay-offs, and labour sourcing challenges, S&P Global noted.

Still, Malaysian goods producers were “generally confident” that output will expand over the next year, S&P Global added.