Malaysia manufacturing showed broad stabilisation during July

BW FILE

BW FILE

The PMI for the manufacturing sector is seen as an important gauge in tracking the health of the sector, with values below 50 points showing contraction while above indicates expansion.

Aashna Dodhia, Economist at IHS Markit, said: "July data signalled a broad stabilisation in Malaysian manufacturing conditions, predominantly driven by output rising for the first time in five months".

Analysts also expressed concerns over the sector's current reliance on exports in the face of lacklustre domestic demand, with many fearing this could leave United Kingdom manufacturers exposed in the event of a full-blown trade war between the U.S. and China.

The headline seasonally adjusted Purchasing Managers' Index™ (PMI™) - a composite indicator created to provide a single-figure snapshot of operating conditions in the manufacturing economy - fell from 51.0 in June to 50.8 in July.

The composite PMI, which covers both manufacturing and services activity, slipped to 53.6 in July, from June's 54.4. A figure above 50 represents industry growth.

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The headline index was supported by the fastest rise in production volumes since March 2017, which partially offset softer rates of new business growth and job creation compared to the previous month. "Moreover, July survey data pointed to strong demand from both domestic and worldwide sources", Dodhia said.

Weighing on the Asian region, the group said activity levels in the two largest manufacturing nations - China and Japan - grew at the slowest pace in eight and 11 months respectively.

With the exception of future output expectations which improved modestly to still-elevated levels, all other components grew slower that a month earlier. "Confidence in the future was meanwhile illustrated by efforts by firms to build inventory reserves in order to prepare for further production growth and further solid hiring", Andrew Harker, Associate Director at IHS Markit, which compiles the survey, said. Respondents indicated that the rise in new business was in line with stronger client demand.

Both input and output price inflation rates accelerated to multi-year highs.

"US tariffs will also be a drag, weighing on investment and foreign demand".

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