KUALA LUMPUR (Oct 1): Malaysia’s manufacturing sector ended the third quarter broadly stable, with softer new orders and output offset by rising employment and easing inflation.

The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers' Index (PMI) fell below the neutral 50 mark for the first time in four months in September. 

At 49.9, down from 50.2 in August, the index ended a three-month sequence of improving operating conditions in Malaysia’s manufacturing sector but signalled a broadly stable environment at the end of the third quarter of the year. 

"Based on the historical relationship between the PMI and official GDP data, the latest figures indicate that GDP should continue to rise solidly in the third quarter. 

"Meanwhile, official manufacturing production data should also remain in growth territory, albeit with the pace of expansion slowing slightly," said S&P in a statement on Thursday.
  
A renewed moderation in new orders — the first in four months and the sharpest since June 2025 — drove the end of the recent period of improving operating conditions, with respondents attributing the weakness to subdued underlying demand.

Meanwhile, the slowdown in total new business was registered despite a fresh rise in new export orders during September, the second in the past three months. 

That said, the rate of increase was only minimal, with total new orders easing; manufacturers scaled back output again in September. 

"The second successive monthly slowdown in production was the fastest in seven months, albeit modest. 

"Faced with weak demand and lower production requirements, firms curtailed purchasing activity during the latest survey period," it added.

The latest survey showed input buying fell for a second consecutive month, although the pace of decrease remained marginal. 

"Panellists commonly cited sufficient inventory levels, limited availability of goods and weak inflows of new work," said S&P. 

Notably, average input delivery times lengthened in September, reflecting port congestion, shortages of shipping containers, adverse regional weather and higher fuel prices. 

Consequently, vendor performance deteriorated solidly and to the greatest extent in three months. 

Despite lower purchasing activity and longer input delivery times, firms increased their stocks of pre-production items in September. 

Some companies attributed the rise to safety stockbuilding amid the ongoing war in the Middle East. The uptick, though marginal, was the most marked since June 2022. 

Confidence in the year-ahead outlook weakened slightly and remained subdued overall, with the respective index falling to a five-month low. 

Some firms expected market conditions and demand to improve over the coming year, but others were more cautious in the outlook. 

The main positive from the latest survey was a second successive monthly increase in employment. 

The pace of job creation edged up to its fastest since April, with firms increasing both full-time and contract staffing. 

Meanwhile, cost pressures eased further across Malaysia's manufacturing sector at the end of the third quarter. 

Although input costs continued to rise due to higher raw material and supplier prices, the rate of inflation eased for the fifth month running to the slowest since February. In turn, output prices also increased at the slowest pace in seven months.