PETALING JAYA: The Malaysian manufacturing sector suffered a loss of momentum at the end of the third quarter of 2022 as demand showed signs of waning and firms scaled back production and purchasing activity.
The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) moved back below the 50.0 mark in September, coming in at 49.1, the lowest for a year, after a reading of 50.3 in August.
Averaging 50.0 over the third quarter of the year, the PMI is representative of a 5% year-on-year growth of gross domestic product (GDP) in Malaysia, thereby representing some loss of momentum from the situation in the second quarter.
S&P Global Market Intelligence economics director Andrew Harker said there were further signs in September that the rebound in growth in the Malaysian economy seen earlier in the year could be losing steam as conditions across the global manufacturing sector limit demand and production at Malaysian firms.
“That said, the latest PMI data are still indicative of growth in official data across the third quarter of the year,“ said Harker in a statement today.
Firms continued to record increases in input costs and longer suppliers’ delivery times, but at less extent than earlier in the year.
Similarly, the latest official manufacturing data suggested a softening in the expansion rate.
Central to the loss of momentum in the latest survey period were reports of waning customer demand, which resulted in moderation in new orders in September, ending a five-month sequence of expansion.
Similarly, new export orders slowed amid weakness in international demand conditions, leading manufacturers to scale back production for the second month, at the fastest moderation rate since March.
On a more positive note, firms managed to hire additional staff at the end of the third quarter, resulting in the first expansion of workforce numbers in 10 months. Although modest, the rate of job creation was the sharpest since April 2019.
“The main positive from the latest survey was 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,“ Harker said.
The hiring of additional staff was part of efforts by manufacturers to bear down on backlogs of work, further helped by a lack of pressure from new order inflows.
Outstanding business decreased in September to the greatest extent in under two years. Purchasing activity moderated for the first time in four months as firms responded to a lack of customer demand. However, the reduction in input buying was only marginal.
Lower purchasing and efforts to limit stock holdings fed through to a reduction in pre-production inventories, the most marked since August 2021. Stocks of finished goods were also down, with manufacturers often favouring existing inventories to meet new order requirements rather than expanding production.
Suppliers’ delivery times lengthened again in September due to raw material shortages and shipping delays. But the lengthening of lead times was much weaker than seen earlier in the year.
Cost inflation eased to the softest for a year. Where input prices did rise, respondents mentioned higher costs for raw materials and transportation, with inflation exacerbated by currency weakness.
Output prices continued to rise as firms passed on higher input costs to their customers.
Optimism dipped to a three-month low due to concerns over the potential for a more prolonged slowdown.