KUALA LUMPUR, Nov 1 — The underlying trend within Malaysia’s manufacturing sector gained traction at the start of the fourth quarter, with the headline index picking up to a six-month high, says US-based critical information, analytics and solutions provider IHS Markit Ltd.

Chief business economist Chris Williamson said welcome signs of manufacturing turning a corner started to appear in October, hinting that the pace of economic growth could accelerate in the fourth quarter.

“The IHS Markit Malaysia Manufacturing Purchasing Managers’ Index’s (PMI) main gauge of production growth has risen to its highest for a year, broadly indicative of the economy growing at an annual rate in excess of five per cent,” he said in a statement today.

He said production is being buoyed by improved domestic demand in particular, but external conditions remain challenging, dampening export growth once again and raising concerns about how much further momentum can continue to build in the absence of improved global economic conditions.

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“It therefore remains too early to say that manufacturing has turned a corner, but we are especially encouraged by producers having become more optimistic about the outlook, which is feeding through to welcome news of improved employment,” he said.

According to IHS Markit’s survey, the headline PMI, a composite single-figure indicator of manufacturing performance, increased to 49.3 in October from 47.9 in September, its highest level for six months and reviving to sit broadly in line with its historical average.

The rise in the PMI was driven by new orders and output, with both indicators showing signs of improvement and subsequently strengthening the business outlook while employment rose as an increasing number of firms reported renewed expansion plans.

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It said survey respondents linked improved demand to new product launches and stronger new work inflows from existing clients.

IHS Markit said upward trends in other forward-looking indicators were also seen at the start of the fourth quarter with survey data for input purchasing, input stocks and finished goods inventories all moving in a positive direction, in line or above long-run averages.

“According to panel comments, greater output requirements and improved demand gave more firms an incentive to stockpile in order to accommodate for further improvements,” it said.

Meanwhile, it said there was also a first month-on-month decline in input costs since March during October as deflation reportedly stemmed from discounts from suppliers and lower commodity prices.

“As a result, Malaysian manufacturers reduced their output charges to the fastest extent since January 2015 in order to gain a competitive edge,” it added. — Bernama