KUALA LUMPUR: Malaysia's Manufacturing Purchasing Managers' Index (PMI) fell to 49.7 in July from June's 49.9, remaining below the neutral level for the second straight month.
The latest PMI reading was largely due to a slowdown in output and new orders but was partially mitigated by the increase in exports, Kenanga Research said.
Despite the poor reading, the firm still expects the recovery in the manufacturing sector especially the export-oriented industries to gain momentum in the second half of the year.
The optimism is driven by the anticipated technology up-cycle, fuelled by higher demand for artificial intelligence (AI) and various stimulus measures in China.
However, Kenanga Research said downside risks persist, particularly from external factors like renewed US-China trade tensions, the escalating Middle East crisis and the prolonged Russia-Ukraine war, which continue to weigh on the global supply chains and demand.
Given the better-than-expected gross domestic product growth in the second quarter of 2024 (Department of Statistics' advance estimate: 5.8 per cent), the firm maintained its bullish outlook on 2024 GDP growth.
"We expect it to settle near our upper-end target range of 4.5-5.0 per cent (2023: 3.6 per cent) thanks to strong domestic demand and continued expansion in the services sector.