KUALA LUMPUR: The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers' Index (PMI) moved back below the 50.0 mark in September, posting 49.1 from 50.3 in August.
The latest reading was the lowest for a year.
Averaging 50.0 over the third quarter of the year, the PMI is representative of just over five per cent year-on-year growth of gross domestic product (GDP) in Malaysia, thereby representing some loss of momentum from the situation in the second quarter.
Similarly, the latest data suggests a softening in the rate of expansion signalled by official manufacturing data.
S&P said the key to the loss of momentum in the latest survey period was reports of waning customer demand.
This 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.
A lack of demand led manufacturers to scale back production for the second successive month, with the moderation rate accelerating to the fastest since March.
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 challenging conditions across the global manufacturing sector limit demand and production at Malaysian firms as well.
"That said, the latest PMI data is still indicative of growth in official data across the third quarter of the year.
"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," he said in a note today,
Meanwhile, S&P said purchasing activity moderated for the first time in 60 months as firms responded to a lack of customer demand.
It said the reduction in input buying was only marginal, however.
Lower purchasing and efforts to limit stock holdings fed through to a reduction in pre-production inventories, which was the most marked since August 2021.
"Stocks of finished goods were also down, with manufacturers often favouring the use of existing inventories to meet new order requirements rather than expanding production," it added.