MALAYSIA’S manufacturing sector remained in contraction for the month of May, although the pace of decline eased slightly, according to the latest data from S\&P Global.
The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) rose to 48.8 in May 2025 from 48.6 in April. While still below the neutral 50.0 threshold that separates expansion from contraction, the data points to a softer moderation in business conditions.
S&P Global Market Intelligence economist Usamah Bhatti noted, “PMI data for May revealed that business conditions in the Malaysian manufacturing sector were muted, as production levels were scaled back due to subdued new orders.”
He added that both production and new order volumes declined at the slowest rates in three months, with reductions being “only marginal overall”.
“As such, the data indicated that gross domestic product (GDP) growth is likely to have sustained at a similar pace as seen in the opening quarter of the year,” he remarked.
Despite the overall downbeat performance, manufacturers faced rising input costs, registering the steepest rate of increase in six months. This was largely attributed to adverse currency movements and the impact of US-imposed tariffs on imported raw materials.
Bhatti said, “The impact of unfavourable currency movements and US tariffs on raw material prices had pushed expenses higher, especially from abroad.”
While the sector remains under pressure, business sentiment remained broadly positive. However, confidence levels declined to their lowest since mid-2021, reflecting growing unease over global trade uncertainties and domestic labour shortages.
“Sentiment stayed positive meanwhile, with firms expecting higher output in the coming year,” said Bhatti. “The degree of confidence receded from April to the lowest since mid-2021 amid concern regarding US trade policy and a lack of suitable workers.”
Meanwhile, employment levels in the sector stabilised in May, ending a seven-month streak of job cuts. Firms also reported marginally lower backlogs, suggesting that weaker new order inflows allowed companies to continue clearing outstanding work.
S&P Global concluded that while the manufacturing outlook remains subdued, the modest uptick in the PMI may offer some reassurance that conditions are not deteriorating sharply, and that Malaysia’s overall economic trajectory remains broadly steady. - June 3, 2025
.jpg)
