KUALA LUMPUR (June 3): The country’s economic growth for the second quarter may grow at a faster-than-expected pace if the manufacturing sector continues to see robust growth like it did in May.

“At present, our forecast broadly assumes a similar pace of expansion for the manufacturing sector during the quarter. 

“However, we will reassess our projections once greater clarity emerges from the May manufacturing output data. Should manufacturing production continue to register robust growth, there may be upside risks to our current 2Q2026 GDP (gross domestic product) forecast of 4.9% year-on-year,” said TA Securities in a note on Thursday.

The seasonally adjusted S&P Global Malaysian Manufacturing Purchasing Managers Index (PMI) came out at 50.4 for the first half of 2026, setting it firmly above the neutral 50 threshold and marking the third time since March that the sector showed expansion.

Based on the historical relationship between the PMI and GDP growth, the latest PMI readings suggest that both overall GDP and official manufacturing output are likely to strengthen in 2Q2026, said TA Securities.  

The expansion was attributed to the two largest sub-components — new orders and output — seeing fresh expansions during the latest survey period.

“While the improvement in new orders prompted some firms to increase purchases of inputs and raw materials, others indicated that demand conditions remained insufficiently strong to justify additional buying activity,” added TA Securities.