Local manufacturing PMI edges up to 49.9 in August, highest since June 2024

KUALA LUMPUR: Malaysia's manufacturing sector showed signs of improvement as the manufacturing purchasing managers' index (PMI) edged up to 49.9 in August from 49.7 in July, its highest level since June 2024 and just shy of the neutral 50-point threshold.

In a research note, Kenanga Investment Bank Bhd (Kenanga IB) said that although the index remained below the neutral mark, the August reading indicated that manufacturing conditions were moving closer to expansion after months of contraction.

Kenanga IB noted that production levels rose for the first time since May 2024, supported by recovering demand.

It said new business increased marginally for the first time since February, while new export sales expanded for a second straight month, underpinned by stronger demand from the Asia-Pacific region.

"Firms ran down inventories to meet the improving demand, trimming stocks of finished goods," the bank said.

Cost pressures, however, mounted in August as firms faced higher raw material costs and tariffs, pushing output prices to rise at their fastest pace since August 2024 despite a slower increase in input costs, it noted.

Nonetheless, Kenanga IB said Malaysia's manufacturing outlook remains relatively resilient, with the final 19.0 per cent United States (US) tariff on Malaysian goods still competitive compared with regional peers.

However, risks persist from potential shifts in US trade policy, possible increases in semiconductor tariffs, and evolving trade relations with China and India.

The bank added that the sector is expected to benefit from global demand for 5G, artificial intelligence adoption, and new product launches while maintaining its 2025 gross domestic product growth forecast at 4.3 per cent, supported by stronger domestic demand, a mining recovery, higher incomes, ongoing investments, and rising tourist arrivals.

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