KUALA LUMPUR (Aug 3): Malaysia’s manufacturing conditions were modestly better in July as orders rose though optimism remained subdued amid the Iran war.

The seasonally adjusted manufacturing purchasing managers index (PMI) was 50.7 in July and unchanged from June, 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.

“Encouragingly, price pressures also eased, with both input costs and selling charges rising at their slowest rates for five months,” said Maryam Baluch, an economist at S&P Global.

The sustained strengthening of business conditions suggests that official data on gross domestic product and manufacturing production will continue to show “solid expansions” moving into the third quarter of the year, the firm said.

Malaysia’s economic growth accelerated to 5.8% in the second quarter as manufacturing activities picked up from rising demand for electronics, while mining output rebounded, official first estimates showed.

The pace of business inflation, however, has also climbed to the fastest in four years amid higher energy costs.

“Overall growth momentum remained limited, as output rose only slightly, employment fell and business confidence weakened amid ongoing geopolitical tensions continuing to cast a shadow over the outlook,” Baluch said.

Confidence in the year-ahead outlook for production among manufacturers surveyed remained historically subdued, S&P Global said, noting that positive sentiment was the weakest in three months.

“While some manufacturers expected firmer demand, product launches and new contracts to support output growth, subdued market conditions and the war in the Middle East weighed on the outlook,” the agency added.