Kuala Lumpur (VNA) – Malaysia’s manufacturing sector recorded its strongest performance in four years in April, but economists have cautioned that the uptick was largely driven by precautionary stockpiling amid the ongoing Middle East conflict.
According to the latest S&P Global report on Malaysia’s Manufacturing Purchasing Managers’ Index (PMI), the seasonally adjusted PMI rose sharply to 51.6 in April from 50.7 in March. This marked the second consecutive month above the neutral 50.0 threshold, signalling an overall improvement in operating conditions. Output growth was the fastest since December 2021.
However, S&P Global noted that the rebound was not entirely demand-driven. Instead, manufacturers and their clients have been actively building “safety stocks”, purchasing large volumes to hedge against potential shortages and price increases linked to geopolitical tensions in the Middle East.
The surge in stockpiling has come at a cost for both businesses and consumers. Input cost inflation climbed to a 45-month high as energy and raw material prices spiked. Manufacturers have passed on these higher costs to customers, pushing selling prices to a record high in the survey’s history.
The conflict has also severely disrupted global logistics, with supplier delivery times lengthening to their worst level in nearly four years. While domestic demand strengthened as local customers increased purchases, external demand weakened. New export orders declined for a second consecutive month, reflecting subdued demand from overseas buyers amid geopolitical uncertainty.
To cope with the sharp rise in production demand, Malaysian manufacturers stepped up hiring, recording the strongest pace of job creation since the beginning of the year. Despite increased staffing, backlogs of work continued to rise slightly due to ongoing material shortages.
Even as output and employment expanded, business confidence remained fragile. Manufacturers’ optimism fell to its lowest level in eight months, weighed down by the unpredictable developments of the Middle East crisis.
Maryam Baluch, an economist at S&P Global Market Intelligence, said the latest data clearly show the conflict’s impact on local factories. Stockpiling has boosted output significantly, partly to build inventories of finished goods. Companies also reported similar behaviour among their customers, resulting in a rebound in new orders in April.
She added that the sector’s performance in the coming months will depend in part on developments in the Middle East, but the latest data highlight the measures manufacturers are taking to mitigate the impact of the crisis./.
