KUALA LUMPUR, March 1 ― Malaysia’s manufacturing sector fell at the fastest rate since November due to shrinking new orders, the Nikkei Malaysia Manufacturing Purchasing Managers Index (PMI) report released today said.

The report added orders have now fallen for twelve consecutive months up to February.

“Latest survey data pointed to a solid deterioration in manufacturing conditions in Malaysia. Production decreased at the sharpest rate since November last year, led by a further drop in new orders.

“Data suggests that the primary cause of the decline in total new work intakes was a fall in domestic demand, as new export orders rose at the sharpest rate since last October,” Amy Brownbill, economist at Markit was quoted as saying in the report.

The headline index dropped to 47.8 this month, down from 48.6 in January, which signalled a “sharper rate of contraction” in the sector.

The report added that companies have also slashed their workforce, the “sharpest in over one-and-a-half years” due to the worsening operating conditions.

This coincides with an online recruitment firm’s index that found hiring has fallen by 28 per cent since a year ago, with the logistics and manufacturing sectors among those most affected.

“Reports suggested that due to the falls in both production and new orders, firms wanted to reduce costs leading to a reduction in workforce numbers,” the PMI report said.

The upside for local manufacturers was that the order backlog was also dropping despite the workforce reduction.

The report noted that the overall fall came despite an increase in orders from abroad last month, indicating that slowing local demand may be the main contributor to the manufacturing slowdown.

“Moreover, the rate of expansion was the sharpest since October 2015 and solid in the context of historical data,” the report said, adding that the declining ringgit contributed the market’s competitiveness.

Local demand has been depressed since the introduction of the Goods and Services Tax (GST) last year while a commodities crash has also caused the ringgit to decline sharply versus the US dollar.

The ringgit was Asia’s worst performer last year, shedding 18 per cent against the greenback.