KUALA LUMPUR (Sept 1): Malaysia's manufacturing sector showed modest improvement in August, with the seasonally adjusted S&P Global PMI posting at 50.2, the weakest reading in the three-month growth sequence.
Although still above the neutral 50 mark for a third straight month, the seasonally adjusted PMI is down from 50.7 in both July and June.
"New order growth slowed over the month, contributing to a renewed moderation in manufacturing production," S&P Global said in a statement on Tuesday.
The rate of easing was moderate and the fastest since February, with survey participants linking the output moderation to slower new order growth, material shortages and challenging economic conditions.
Despite a third consecutive monthly rise in new orders, business confidence remained subdued while purchasing activity and inventories declined.
The rate of expansion was only marginal and the weakest in the current growth sequence, with the factors behind the new orders slowdown broadly mirroring those weighing on output.
On a more positive note, August saw the first rise in staffing levels in five months, with manufacturers taking on both full- and part-time staff.
Firms continued to report a lack of capacity pressure, with backlogs falling for a second straight month, though the rate of depletion was only marginal.
Despite a greater willingness to raise staffing levels, purchasing activity moved in the opposite direction, declining for the first time in five months as some manufacturers cited weak market conditions, elevated raw material prices and sufficient stock holdings as reasons to scale back purchases.
As firms drew on existing inventories to meet sustained new order growth, both stocks of purchases and finished goods declined in August after two months of marginal accumulation.
Malaysian manufacturers continued to face longer lead times for inputs due to poor weather, low stock availability and port congestion, though delays were only slight and the least pronounced in seven months.
Input costs and output charges rose modestly, with inflation easing to a six-month low and selling prices increasing only modestly in response, as firms passed on higher fuel and raw material costs.
Despite general confidence that output would rise over the coming year, sentiment remained historically weak and broadly unchanged from July, while the historical PMI relationship suggests gross domestic product (GDP) and manufacturing output growth should improve in the third quarter.