Renewed weakness in new manufacturing orders in October signalled softer demand conditions ahead for Malaysia, economists said, after the S&P Global purchasing managers index (PMI) eased to 49.5 from 49.8 in September, remaining below the 50-point expansion threshold.
The latest level, its lowest in four months, indicates a slight contraction in factory activity and a weak start to the fourth quarter, TA Securities said.
The trend is consistent with expectations of a slower manufacturing performance into year end, the research house said in a note.
"Data also indicated that the overall decline in sales was partly driven by a sharper drop in new export orders," it added.
Malaysia's manufacturing sector saw the first decline in total new orders in three months, dragged by a steeper fall in export sales to Asia-Pacific and Africa, reflecting subdued external demand and softer market confidence.
Separately, BIMB Securities noted that Malaysia was the only major Asean market to remain in contraction as Indonesia, Thailand and Vietnam saw stronger expansion in October, supported by domestic demand, while China also saw factory activity soften, further clouding the export outlook.
"Despite the softer conditions, business confidence improved to its highest since April 2023, driven by expectations of stronger future sales and better market conditions," it said.
Meanwhile, Kenanga Research said the lower PMI aligns with expectations for a slower fourth quarter, as US tariff measures and supply chain delays continue to dampen export performance. However, it expects domestic-oriented industries to stay resilient, supported by household spending, public investment under Budget 2026, and the 13th Malaysia Plan.
Manufacturers scaled back production at the fastest pace in five months and relied on existing inventories, while purchasing activity moderated and delivery times lengthened amid shipping delays and material shortages.
Staffing levels were trimmed for a fourth straight month even as backlogs eased, indicating that the current capacity was sufficient.
Input costs continued to rise but firms cut selling prices for the first time in six months to defend competitiveness amid lacklustre demand.
Nevertheless, business sentiment improved to the highest in over two years as firms anticipate better order flows ahead.
Analysts said domestic demand and government spending should help mitigate the economic slowdown, but the lagged effects of tariff risks and global trade uncertainty mean that market conditions are likely to remain cautious in the short term.
Source: theedgemalaysia