KUALA LUMPUR, Aug 1 — Manufacturing sector output fell the least in July compared to the previous six months of the year, hinting that the continued slowdown could be bottoming out.

According to the latest Nikkei Purchasing Managers Index (PMI), all areas of manufacturing — ranging from new orders to raw material purchases — similarly registered reduced rates of contraction.

New orders, in particular, declined at the slowest rate since March, below the 17-month average since the manufacturing sector slowdown first began.

The headline PMI for July also rose to 48.1, up from 47.1 the month before. The index considers any score above 50 to indicate an improvement in the sector.

“Despite subdued demand, volumes of unfinished work were accumulated for the first time in six months. Moreover, the rate of increase was the sharpest since last November,” Nikkei Malaysia said in the report.

Despite the improvement, however, factories began trimming their workforce for the first time since April, with companies citing attempts to reduce cost amid the continued slowdown as the reason for cutting employment.

Nikkei said the reported job cuts were only marginal, however.

The situation was also mitigated by lower inflation growth — the lowest since March — which helped ease pressure on purchasing.

“Where input prices rose, firms mentioned greater raw material costs stemming from unfavourable exchange rates and the increase in sales tax,” Nikkei said.

The continued manufacturing slowdown has weighed on Malaysia's economic growth, which has fallen to its lowest level in six years. First quarter GDP growth came in at 4.2 per cent, down from 4.5 per cent in the preceding quarter.

The ringgit's depressed value has hurt factories in Malaysia and is again trading at over 4 to the US dollar, having fallen again after a brief climb that saw it go below the psychological barrier.

Bank Negara Governor Datuk Muhammad Ibrahim previously said the country was on track to meet growth targets of between 4 and 4.5 per cent for the entire year.

Bank Negara also unexpectedly cut the overnight policy rate by .25 basis points last month, lowering the interest rate to 3 per cent.