KUALA LUMPUR: Malaysian manufacturers have often reported demand weakness in May and this is evident across a range of indicators in the latest S&P Global's survey.
Output and new orders both moderated to a greater extent than in April, while firms scaled back employment for the first time in five months, S&P Global's Malaysia Manufacturing Purchasing Managers' Index (PMI) showed.
Purchasing activity also softened, and this weakness in demand for inputs fed through to improvements in supply chains and relatively muted inflationary pressures.
"In fact, supplier performance improved to the largest degree in just over 10 years," S&P said.
The seasonally adjusted Malaysia PMI posted 47.8 in May, down from 48.8 in April.
The latest reading signalled further
challenges for firms in the manufacturing sector, with business conditions moderating to the greatest extent since January.
"When looking at the relationship between the PMI data and official gross domestic product (GDP) numbers, the figures for the second quarter so far suggest that GDP growth will hold steady around the 5.5 per cent year-on-year mark posted in the first quarter.
"The latest data, meanwhile, is consistent with official manufacturing data nearing stagnation on a year-on-year basis," it said.
Andrew Harker, economics director at S&P Global Market Intelligence, said Malaysian manufacturers were clearly enduring a challenging time at present.
"Although the latest figures are still representative of growth in official numbers, the sector does appear to be going through a soft-patch which may yet last for some months to come.
"Reflecting this, firms are being cautious in terms of their spending, pulling back on input purchasing and scaling back employment."
Barker added that a degree of spare capacity had become evident, not least in supply chains where delivery times improved to the greatest extent in just over a decade in May.
S&P said manufacturing new orders moderated for the ninth month running in May, with the latest slowdown the sharpest in three months amid widespread reports of demand weakness.
The subdued demand environment was not limited to the domestic market, with new export orders also softening.
A lack of demand was also a key factor behind a further slowdown in manufacturing production, which eased for the 10th month running and to the greatest extent since January.
Manufacturers responded to these trends by scaling back their own purchasing activity, in turn feeding through to the most marked reduction in stocks of purchases for 21 months.