NEW order inflows for Malaysian manufacturers reduced for the fifth month running, according to the latest survey by S&P Global.

The moderation was sharp and the strongest seen since August 2021 as firms noted muted demand and client confidence in both domestic and international markets, it said in its S&P Global Malaysia Manufacturing PMI released today.

As such, it said export demand for Malaysian manufactured goods fell further, and at the sharpest pace since June 2021.

While demand conditions moderated, the survey noted that supply chains were able to improve at Malaysian goods producers as delivery times shortened for the first time since November 2019, albeit only marginally.

Firms often attributed the improvement in vendor performance to improved shipping times and reduced port congestion. Concurrently, firms took the opportunity to further wind down holdings of raw materials and finished items while demand conditions were softer and firms had ample stockpiles following previous advance purchases, according to the statement.

Looking ahead, it said Malaysian manufacturers were increasingly optimistic regarding the year-ahead outlook for output amid hopes that both domestic and external demand conditions would improve as the global economy recovers. The overall level of confidence rose to the strongest since August 2019 as a result.

The S&P Global Malaysia Manufacturing PM is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month.

S&P Global Market Intelligence economist Usamah Bhatti said that there were further signs in January that economic conditions in Malaysia remained muted, as challenging conditions across the manufacturing sector limited demand and production at Malaysian manufacturing firms.    “The latest PMI data are still indicative of growth in official data heading into the new year, though at a softer rate.

“That said, two positives came from the latest survey result, the first being a renewed expansion in employment, helping firms to keep on top of workloads and setting a base to expand output in the future should demand start to regain momentum. The second was the first reduction in delivery times for just over three years as material shortages, port congestion and delivery issues continued to normalise. Better availability of materials also contributed to the softest rise in input prices in the current sequence of inflation that began in June 2020,” he said in the statement.

On the whole, the survey noted that the operating conditions in the Malaysian manufacturing sector moderated to a greater extent at the start of 2023.

Output levels were scaled back for the sixth successive month, and at the fastest pace since September 2021, while the rate of reduction in new order inflows was the most pronounced for 17 months.

In a separate report for Asean, S&P Global noted that the region’s manufacturing firms reported an improvement in operating conditions at the start of 2023, with the upturn across the sector supported by a modest rise in production levels and renewed growth in factory orders.

Malaysia was the only country where manufacturing conditions worsened at a steeper rate in January. Moreover, the pace of contraction accelerated for the fourth month running, with the latest PMI reading of 46.5 the lowest recorded in 17 months. – TMR