KUALA LUMPUR: Malaysia's manufacturing sector continues to face challenging business conditions in the final month of 2022, according to S&P Global.
Muted customer demand reportedly contributed to sustained moderations in output and order books, S&P said, adding that companies subsequently trimmed input buying and downwardly adjusted inventory levels.
Backlogs of work, meanwhile, depleted at a rate among the fastest on record.
"Some more positive developments within the latest survey data came from cost and supply pressures both easing. Vendor performance stabilised in December, ending the three-year sequence of deterioration, and firms cut their selling prices for the first time since May 2020," it said today.
The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers' Index (PMI) posted at 47.8 in December, slipping from 47.9 in November to mark a fourth consecutive softening of operating conditions across the Malaysian manufacturing sector.
The latest moderation, though broadly in line with that seen in November, was the strongest since August 2021.
S&P said averaging 48.1 over the final quarter of the year, the PMI was representative of about five per cent year-on-year growth of GDP in Malaysia, thereby representing some loss of momentum from the situation in the third quarter.
Similar to each of the three months prior, a running theme within the latest survey data was fragile customer demand.
New orders and foreign demand both moderated in December, stretching the current sequences of reduction to four and six months respectively.
Reflecting the softer inflows of new work, Malaysian manufacturing firms scaled back production volumes in the final month of the year, the firm said.
The rate of moderation was slightly steeper than in November and the joint-sharpest since March.
S&P Global economist Laura Denman said with muted customer demand remaining a key theme within December's PMI data, the Malaysian manufacturing sector registered a further loss in momentum in the final month of 2022.
"The moderation in order book volumes, though slightly softer than in November, remained stronger than the average for the year as a whole which subsequently led firms to scale back production at a solid pace.
"Forward looking indicators suggested that firms were anticipating conditions to remain challenging in the coming months as signalled by a further trimming in input buying, reductions in inventory levels and a relatively weak outlook on output over the next year."
She, however, said with demand subdued, supplier performance had been able to recover somewhat with December data marking no-change in delivery time from the month prior, following a three-year sequence where delivery times have lengthened on a monthly basis.
Latest survey data was also indicative of an easing in cost pressures.
Denman said input costs rose at the slowest pace in the current 31-month sequence of inflation and prices charged by Malaysian manufacturing firms fell for the first time since May 2020.
