However, manufacturers also noted that inflationary pressures strengthened for the 1st time in 3 months

by NURUL SUHAIDI / Pic by TMR

THE Malaysian manufacturing sector in June saw a quicker overall operating conditions improvement, the first time after five consecutive months of decline.

The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) registered 50.4 in June, rose from 50.1 in May indicating a slightly stronger, yet still modest, improvement in the overall manufacturing segment.

Based on the research note, the overall production levels also stabilised for the first time after five consecutive monthly declines, while firm new orders rose for the third month running, albeit only fractionally.

However, manufacturers also noted that inflationary pressures strengthened for the first time in three months, as input costs and output prices increased at sharper rates amid sustained material shortages and rising energy prices.

S&P Global market intelligence chief business economist Chris Williamson said Malaysia’s manufacturers reported a steady but unspectacular end to the second quarter (2Q), underscoring how the economic recovery has lost some steam compared to the start of the quarter.

 “However, companies are reporting sluggish export sales and growing concerns over the rising cost of living, especially in terms of rising energy and fuel prices,” he said in the note today.

Williamson added that both input costs and average selling prices are rising sharply again, suggesting inflationary pressures continue to build.

“While there was good news in terms of some supply constraints showing clear signs of easing which should help alleviate some industrial price pressures, global energy and food supply having become increasing sources of concern,” he said.

Despite the higher raw material prices as well as labour and supply shortages, firms reported and improved new orders at the end of 2Q, marking the third instance of growth in as many months.

Following the trend for input costs, factory gate charges increased at the fastest rate in three months, which caused goods makers to report job losses for the fifth consecutive month in June.

Anecdotal evidence suggested that higher raw material and freight costs contributed to higher prices. Concurrently, firms sought to pass higher costs on to customers, evidenced by a sustained rise in output prices.

As a result, employment levels fell modestly, mainly due to the non-replacement of voluntary leavers and a lack of available workers from abroad.

Nonetheless, overall, Malaysian manufacturers expressed optimism regarding the year-ahead outlook for the twelfth month running in June.

Looking at the historical relationship between official statistics and PMI, the latest reading is representative of modest growth in industrial production and GDP in the 2Q of the year, following a strong start to 2022.

That said, positive sentiment eased to a 10-month low due to concerns about the timing of a full global recovery and the impact of higher prices.