Positive growth for Malaysia’s manufacturing sector
04 Feb 2025
Malaysia’s manufacturing sector is likely to sustain positive growth, buoyed by resilient domestic demand and gradual improvements in supply chain conditions.
Public Investment Bank Bhd (PublicInvest Research), however, said downside risks to external demand remain elevated, mainly in the second half of 2025 (2H25), as subdued global growth prospects and escalating geopolitical tensions weigh on export-oriented industries.
“Heightened uncertainty surrounding global trade policies, especially following Donald Trump’s policy stance, could add further pressure on industrial activity. Despite these challenges, steady domestic consumption, fiscal measures supporting investment, and a gradual recovery in key trading partners may help mitigate external headwinds,” it said in a note.
It said the manufacturing sector remained under pressure at the start of 2025, with firms reporting continued moderations in both production and new orders.
In response to subdued demand conditions, manufacturers cut selling prices for the first time since June 2023, marking the sharpest reduction since January 2015, according to S&P Global.
Purchasing activity was scaled back and employment moderated, with firms utilising spare capacity to clear outstanding backlogs.
“According to S&P Global, the latest purchasing managers’ index (PMI) reading indicates that gross domestic product (GDP) growth remains on a positive trajectory, albeit at a more moderate pace, while also signalling sustained year-on-year improvements in official manufacturing output.”
The manufacturing PMI edged up slightly to 48.7 in January (Dec 2024: 48.6).
Mong forward the global semiconductor sector, it said AI-related demand is likely to remain a key growth driver in 1H25, providing near-term support.
However, sectoral headwinds are expected in 2H25, as weaker chip shipments in non-AI segments, sustained trade restrictions, and softer demand in key end markets, including automotive and industrial applications, could weigh on momentum.
In a separate note, Affin Hwang Investment Bank said manufacturers reported that demand remained weak, which may be attributed to uncertainty in the global economic demand.
Nevertheless, manufacturers remained positive at the start of the year and expect a higher output over the next twelve months.
“Hence, we believe that further recovery in external trade activities and resilient domestic demand may spur the demand for manufactured goods in the near term,” it added.
Additionally, MIDF Research maintained a positive outlook for Malaysia’s manufacturing, which will be spurred by growing domestic spending, supported by rising employment and household income, higher minimum wages, and government salary hikes.
The global tech upcycle is also poised to support the manufacturing sector.
“However, we opine the strength of external demand could be constrained by intensified global trade tensions following higher tariffs imposed by the US and the retaliatory actions by other countries,” it said.
Source: NST
