KUALA LUMPUR (Nov 3): The electrical and electronics segment will continue to drive overall growth despite supply chain risks, and inflationary pressures after the manufacturing sector saw renewed improvement last month.

Malaysia’s manufacturing PMI rose to 51 on Oct 26 from 49.9 in September, a six-month high which S&P Global largely attributed to stronger demand for artificial intelligence (AI) related products.

"Although S&P Global attributed part of the improvement in Malaysia’s PMI to stronger demand for AI-related products, our domestic export data suggest that several other industries also recorded stronger export activity, potentially supporting higher production," said Philip Research in a note on Tuesday (Nov 3).

The research firm said subdued near-term sentiment is likely to limit the scope for a strong rebound in non-E&E sectors.

Phillip Capital noted that this growth trajectory was reflected in other Asean states. Indonesia saw its manufacturing PMI rise to 54, its highest reading since March 2024, driven by new orders increasing to their fastest pace in five years.

Meanwhile, Thailand’s PMI rose to a year-to-date high of 54.8 thanks to a sharp increase in new orders.

Japan, South Korea and Taiwan continued to record increases in new orders and output, although the pace of expansion slowed across all three economies.

Separately, MBSB Research noted that the latest reading was supported by renewed growth in both output and new orders, with new order expansion among the fastest recorded in four-and-a-half years.

This stronger demand boosted purchasing activity and kept employment growth up for the third consecutive month.

However, partly due to the ongoing Middle East conflict, input-cost inflation accelerated as higher transportation and raw-material costs led manufacturers to raise selling prices.

This led to sentiment weakening to a six-month low amid rising cost concerns.

“Rising input costs, persistent supply-chain disruptions and weaker business sentiment remain key downside risks. Ongoing geopolitical tensions in the Middle East and elevated transportation costs could continue to exert pressure on manufacturers’ margins,” said MBSB.