KUALA LUMPUR, Oct 1 — Malaysia’s manufacturing sector experienced a mild loss of momentum in September as client demand softened, though businesses continued hiring and price pressures eased further, according to the latest S&P Global survey.

The headline S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) slipped to 49.9 in September from 50.2 in August. The marginal dip below the neutral 50.0 threshold marks the first sub-50 reading in four months, ending a three-month streak of expanding operating conditions. 

The headline PMI is compiled from monthly responses by purchasing managers at approximately 400 manufacturing companies across Malaysia, with figures above 50.0 signalling month-on-month improvement and readings below 50.0 indicating contraction.

New business inflows fell for the first time in four months, registering the steepest deceleration since June 2025 as respondents cited sluggish underlying domestic demand. While export orders expanded for the second time in three months, the pace of international growth remained modest.

In response to softening demand, manufacturers scaled back production volumes for a second consecutive month at the sharpest rate in seven months, though S&P Global noted the reduction remained modest. Purchasing activity was similarly curtailed as firms cited adequate existing stockpiles, supply constraints, and fewer incoming orders.

Sustained hiring and cooling cost pressures

Bucking the slowdown in production, employment levels expanded for a second consecutive month, with the rate of job creation reaching its highest point since April as manufacturers added both full-time and temporary contract workers.

Cost pressures continued to moderate across the board. While raw material and supplier charges continued to push input costs higher, the rate of inflation slowed for the fifth consecutive month to its weakest pace since February. Consequently, factory-gate price inflation decelerated to a seven-month low as producers passed fewer cost burdens on to clients.

Supply chain bottlenecks, however, showed signs of deterioration. Vendor lead times lengthened at the fastest rate in three months, driven by port congestion, container shortages, regional weather disruptions, and elevated transport fuel costs.

Amid ongoing geopolitical risks in the Middle East, several manufacturers engaged in precautionary stockpiling, driving inventory growth to its strongest level since June 2022. Nonetheless, overall business sentiment regarding output over the coming year softened to a five-month low due to external economic uncertainties.

“September data pointed to a mixed picture across Malaysia’s manufacturing sector. Employment increased and easing inflationary pressures were positive signs, but moderations in output and new orders, alongside weaker business confidence pointed to subdued business conditions,” said Maryam Baluch, Economist at S&P Global Market Intelligence.

“Additionally, external uncertainties — notably the ongoing war in the Middle East and El Niño — make the outlook for the year difficult to assess. Nevertheless, continued employment growth suggests that firms remain willing to expand capacity despite these headwinds.”

Based on historical correlations between PMI data and national statistics, S&P Global noted that Malaysia’s gross domestic product (GDP) is projected to sustain solid expansion in the third quarter, with manufacturing production remaining in positive growth territory at a slightly moderated pace.