KUALA LUMPUR (Sept 1): Malaysia’s manufacturing activity is likely to remain in expansion territory in the coming months, although growth momentum could weaken amid persistent geopolitical tensions and uncertainty over global trade, analysts said.
The seasonally adjusted manufacturing purchasing managers index (PMI) fell slightly from 50.7 in July to 50.2 in August. Although it remained above 50, showing continued growth, the slowdown marked the fastest deterioration since February.
Slower growth in new orders and subdued business confidence point to a more moderate pace of expansion in the near term, BIMB Securities said in a note on Tuesday.
Ongoing geopolitical tensions, particularly in the Middle East, coupled with broader uncertainty surrounding global trade, remain key downside risks to the sector’s outlook, it said.
Nevertheless, the artificial intelligence (AI)-driven semiconductor cycle, lower US tariff burdens and Malaysia’s diversified, consumption-led economy are expected to continue supporting factory output and exports, the research house said.
The softer PMI reading has also prompted some moderation in expectations for industrial output. BIMB Securities expects Malaysia’s industrial production index to grow 4.8% in 2026, slower than the 5.9% year-on-year growth recorded in the first half of the year.
Kenanga Research likewise noted that softer new orders, moderating production, falling purchasing activity and weak business confidence all point to fading momentum.
Nevertheless, continued expansion in manufacturing activity, albeit at a slower pace, could help the Malaysian economy sustain growth of above 5% for another year, it noted.