Malaysia’s manufacturing momentum cools in September, but hiring and price relief hold steady

KUALA LUMPUR, Oct 1 — Malaysia's manufacturing sector showed signs of a cooling in September after demand from clients weakened, though companies kept hiring and dealt with less price pressure, according to the latest S&P Global survey. The headline S&P Global Malaysia Manufacturing Purchasing Managers' Index (PMI) dipped to 49.9 in September from 50.2 the previous month, marking the first sub-50 reading in four months and ending a three-month stretch of expanding conditions.

The PMI, based on monthly responses from purchasing managers at around 400 manufacturing firms across Malaysia, signifies month-on-month improvement when above 50.0 and contraction when below 50.0. New business inflows declined for the first time in four months, marking the steepest deceleration since June 2025 due to sluggish domestic demand.

While export orders grew for the second time in three months, the rate of international expansion remained modest. In response to declining demand, manufacturers reduced production volumes for the second consecutive month at the sharpest rate in seven months, although the decline was still modest. Purchasing activity also fell as firms had sufficient stockpiles, faced supply constraints, and received fewer orders.

Despite the slowdown in production, employment levels grew for a second month in a row, reaching the highest point since April as manufacturers added both permanent and temporary contract workers. Cost pressures eased for the fifth straight month, with input costs rising but inflation slowing to its weakest pace since February. Consequently, factory-gate price inflation dropped to a seven-month low as producers passed on fewer cost burdens to clients.

However, supply chain bottlenecks worsened, with vendor lead times lengthening at the fastest rate in three months due to port congestion, container shortages, regional weather disruptions, and higher transport fuel costs. Amid geopolitical risks in the Middle East and climate factors like El Niño, business sentiment on output over the next year softened to a five-month low, as manufacturers stocked up as a precaution, driving inventory growth to its strongest level since June 2022.

Despite these challenges, overall business confidence regarding future production remained relatively stable. S&P Global noted that historical patterns suggest Malaysia's GDP should continue robust growth in the third quarter, with manufacturing production expanding at a slightly moderated pace.