KUALA LUMPUR: Malaysia’s manufacturing purchasing managers’ index (PMI) showed a slight improvement in November, inching up to 47.9 from October’s 46.8, signaling a softened slowdown.
According to a report by Kenanga Investment Bank Bhd, the index has reached a seven-month high, despite remaining below the neutral threshold of 50.0, suggesting a potential upturn in manufacturing activity on the horizon.
“The ongoing slowdown is attributed to weak demand from both domestic and international markets,” the research firm said in a report.
Further, Kenanga noted that amid subdued demand conditions, production moderated, and both new orders and exports continued to ease due to a persistently weak demand environment.
Although the pace of slowdown has eased since August, backlogs of work have been decreasing, with a milder rate of depletion compared to October, the firm said.
“Cost pressures persist, driven by currency weakness and rising raw material costs, resulting in a one-year high in input prices.
“Consequently, businesses have increased their output charges for the fourth consecutive month, navigating challenges in the international market and a weaker currency,” Kenanga report said.
The research firm noted that domestic manufacturers continue to express confidence in the outlook for production, with the latest increase in confidence indicating a demand revival that bolsters their optimism.
Simultaneously, employment has stabilised, revealing the mildest decline in the past seven months, it said.
Moving ahead, Kenanga said the slowdown in manufacturing activity appears to be reaching its bottom and is anticipated to gradually improve in the near term.
The firm said the recent uptick in manufacturing PMI suggests a potential resurgence in the health of the sector as the year concludes, with positive momentum extending into 2024.
“Factors contributing to this include an expected upswing in the technology sector and China’s gradual recovery, both set to enhance Malaysia’s export performance.
“As a result, our forecast indicates that the gross domestic product (GDP) growth will continue to expand in the final quarter, reaching 3.7 per cent as compared to 3.3 per cent in the third quarter (Q3) of 2023.
“This expansion is primarily attributed to resilient domestic demand, boosted by year-end festive spending and increased tourist arrivals,” Kenanga said.
Furthermore, the growth will be supported by heightened fiscal spending towards the year’s end, as is typical of government practices, the firm noted.
“Overall, we maintain our GDP growth forecast for 2023 at 3.5 per cent to 4.0 per cent, with expectations leaning towards the upper end of the range.
“Additionally, there’s a possibility of further expansion to 4.9 per cent in 2024,” Kenanga noted.
