Malaysian manufacturing roars back but rising costs could hit your wallet soon

KUALA LUMPUR, Nov 2 — Malaysian factories are grappling with soaring transport and material costs, directly charging buyers as factory-gate inflation mirrors the uptick in production costs. The S&P Global Malaysia Manufacturing PMI revealed that input expenses and selling charges surged at similar, rapid rates in October. Freight and raw material expenses climbed due to the ongoing Middle East conflict, according to survey respondents.

Despite the mounting cost pressures, the sector rebounded, with the headline PMI rising to 51.0 in October from 49.9 in September, signaling its strongest growth since April. New orders surged, driven by robust export sales and increased demand from existing domestic clients. Factories increased output for the first time in three months and expanded their workforce for the third consecutive month.

S&P Global economist Maryam Baluch noted that new orders returned to growth, supported by stronger demand for AI-related products. However, supply snags and port congestion continue to hamper the sector's recovery. Delivery schedules for manufacturing inputs worsened for the eleventh straight month, with port congestion cited as a persistent issue.

To meet the growing order books, some factories drew upon existing stockpiles, reducing finished goods inventories for a sixth consecutive month. Yet, the improvement in orders and output did little to boost long-term confidence, as business sentiment sank to its lowest level since April. Manufacturers attributed their cautious outlook to rising expenses and global geopolitical and macroeconomic volatility.

While the PMI measures factory-gate prices, the swift transfer of costs from manufacturers to intermediate buyers suggests potential downstream inflation that could eventually impact consumers. The survey, conducted between October 12 and 26, polled purchasing managers from around 400 manufacturing operations in Malaysia.