KUALA LUMPUR: Malaysia's manufacturing sector conditions improved midway through the second quarter of 2024, supported by renewed growth of new business and production, S&P Global said.
Job creation also unfolded for the first time in five months, although firms were cautious with acquiring inputs as the expansion in new orders was only marginal.
Business confidence, however, waned.
On the price front, the rates of inflation for input costs and output prices both increased in May, but remained subdued compared to their respective series averages.
The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers' Index rose to 50.2 in May, up from 49.0 in April.
Posting above the 50.0 neutral mark in May, the latest data signalled a renewed improvement in manufacturing sector conditions following 20 months of moderation.
The latest PMI reading suggested that gross domestic product (GDP) growth is running at a slightly improved rate than that seen in the first quarter of 2024, as well as pointing to modest year-on-year improvements in official manufacturing production data.
Production levels returned to expansion for the first time since July 2022, albeit only marginally.
This was underpinned by renewed growth in new orders, marking an end to 20 successive months of subdued demand conditions.
Better underlying demand was behind the rise in new work, according to survey panellists.
Jingyi Pan, economics associate director at S&P Global Market Intelligence, said the latest PMI data revealed that business conditions in the Malaysian manufacturing sector had started to improve again midway through the second quarter of 2024.
"This indicated a turnaround from the period of subdued conditions previously and hints at an acceleration in growth of GDP into Q2.
"It was encouraging to see employment conditions improve with manufacturers acquiring more headcounts on account of rising new orders.
"And while the expansion in new orders and production was accompanied by rising inflation, the rates of increase in both input costs and output prices were subdued by historical standards."
Overall sentiment also stayed positive, with firms expecting higher output in the coming year, Pan added.
"That said, the level of confidence eased, and affected manufacturers' willingness to acquire input inventories. These will be areas to monitor for further signs of a turnaround," Pan noted.
S&P said Malaysia's export orders rose as well, and at the most pronounced pace in just over three years, with manufacturers reporting higher inflows of new work from the US, Europe, Middle East and other parts of the Asia Pacific region.
To cope with rising workloads, Malaysian manufacturers hired additional workers in May. This marked the first rise in manufacturing headcounts since the end of 2023.
Although marginal, the rate of job creation was the fastest in just over a year.