Malaysian manufacturing sector continues three-month poor slide, Nikkei index shows

KUALA LUMPUR, Aug 1 — The local manufacturing sector continued to underperform last month with production falling for the third month in a row, according to a report by Japan-based financial publisher Nikkei.

Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) which measures the performance of the sector, rose to 48.3 points in July, showing a slower rate of decline in the manufacturing sector compared to June (46.9).

“The Malaysian manufacturing sector continued to struggle in the face of tepid demand, particularly from within the domestic economy, during July,” said Paul Smith, the director of IHS Markit that compiled the report.

“Output, purchasing activity and inventories were all cut as near-term prospects remained bleak.”

The report said a fall in new orders due to underwhelming market demand was the primary cause behind lower sales.

A key reason for the reduced new orders was due to the weakness in the domestic market, as foreign sales were broadly unchanged in July, the report said.

It also noted that persistent weaknesses in several key indices meant that deteriorating operating conditions last month was even worse than the first half of the year, on average.

Despite the contraction, manufacturers employed more people in anticipation of a production increase over the coming year, with current confidence on future output staying positive.

“However, companies retained some hope of an improvement in operating conditions over the medium-term, expecting growth to occur in the next 12 months.

“This helped to bolster employment, which subsequently rose marginally for the second time in the past three months,” Smith said.

The report also showed that work backlogs have reduced for the third time in the past four month—the rate of contraction was the greatest recorded by the survey since data were first collected over five years ago.

The PMI is based on data compiled from purchasing executives in over 400 manufacturing companies, in eight categories: basic metals, chemicals and plastics, electrical and optical, food and drink, mechanical engineering, textiles and clothing, timber and paper, and transport.