MIDF Amanah Investment Bank Bhd anticipates Malaysia’s manufacturing sector will sustain its recovery momentum, supported by improving factory output and steady domestic demand, even as external risks such as tariff hikes pose ongoing challenges.
This outlook is underpinned by the latest S&P Global Manufacturing Purchasing Managers’ Index (PMI), which rose to 49.3 in June 2025 — its highest level since October 2022. The uptick signals stronger production activity and a more moderate decline in new orders, reflecting renewed operational resilience within the sector.
In a research note, the investment bank said it expects Malaysia’s Industrial Production Index (IPI) to gain traction, driven by manufacturing output recovery and a temporary boost from external trade.
“Sentiment in financial markets indicates that expectations are beginning to move past tariff-related uncertainties,” the firm noted. However, it warned that continued weakness in mining output could dampen overall IPI performance in the months ahead.
In related data, the Department of Statistics Malaysia (DOSM) reported that manufacturing sales rose 2.4% year-on-year to RM158.7 billion in May 2025, although this marked a slowdown from the 4.7% growth recorded in April.
Chief Statistician Datuk Seri Dr Mohd Uzir Mahidin attributed the May performance primarily to the food, beverages, and tobacco sub-sector, which recorded a robust 13.0% year-on-year increase, following a 10.8% gain in April.
Looking ahead, MIDF Amanah expects short-term manufacturing sales to remain firm, buoyed by a temporary lift from the current pause in tariff increases before the implementation of new US tariffs scheduled for 1 August 2025.
While the firm acknowledged that upcoming US tariff measures could weigh on production in export-driven segments, it remains optimistic that robust domestic consumption and ongoing construction activity will continue to support production in domestically focused industries.
Given the current trajectory, MIDF Amanah maintains its projection that Malaysia’s IPI growth will moderate to 2.0% for 2025.
It also cautioned that extended external uncertainties — particularly those stemming from higher tariffs and a potential drop in final demand — could prompt export-oriented manufacturers to scale back operations, especially as the impact of front-loading activities fades once the new US trade measures take effect.
Nonetheless, the investment bank remains confident that the IPI will stay in expansionary territory, bolstered by higher output in domestic-facing industries. This outlook is supported by resilient household spending, favourable labour market conditions, and rising income levels.
-Bernama
