KUALA LUMPUR, April 2 — Lower local and international demand led to the first reported contraction among Malaysian factories in eight months, according to Nikkei Malaysia.

In its monthly Purchasing Managers Index (PMI), Malaysia slid to 49.5 in March or marginally lower than the 49.9 registered in February.

The index considers any score above 50 to be an improvement, while those below signify a contraction.

“Malaysia’s manufacturing sector ended Q1 2018 on a slightly weaker footing, with output declining for the first time in eight months amid reports of poor demand conditions,” said Aashna Dodhia, an economist at IHS Markit that compiled the data.

“Moreover, the New Export Orders Index registered at a 15-month low, highlighting falling demand for Malaysian goods from international markets.”

Most respondents cited weak underlying demand as the main cause of the decline from global customers, although the majority described the dip as marginal.

Malaysian factories also had to contend with continued price increases for their raw materials, with average prices in March indicating 18 months of unbroken cost hikes.

Dodhia said this resulted in continued pressure on manufacturers' margins as they face limited pricing power due to declining orders.

Factories remained optimistic regarding the next 12 months, however, with 12 per cent of respondents saying they expected an increase in output on the back of fresh orders and more projects coming online.

Nevertheless, the prevailing sentiment is the weakest since December and continues to lag behind the average outlook.

“A downbeat mood was also reflected with jobs growth slowing to the weakest in the current period of staff recruitment,” according to Dodhia.

Elsewhere in Asean, manufacturing conditions remained stagnant last month, with the regional PMI slipping to 50.1 from 50.9 in March.

Myanmar's significant increase stood out with its PMI of 53.7, while Singapore's contraction was also notable after factories in the island state regressed to 47.5 on the index, indicating a modest decrease.

IHS Markit also projected slower manufacturing growth for the region over coming months, based on the glum outlook among purchasers.