Malaysian manufacturing sector recovers and grows, Middle East tensions escalate

2026-04-01 06:58:03

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Investing.com – Based on data released by S&P Global on Wednesday, Malaysia’s manufacturing sector returned to growth in March, with the Purchasing Managers’ Index rising from 49.3 in February to 50.7. The reading marked the strongest improvement in nearly four years.

Production rose slightly during the month, with the pace being the most notable since December 2021. The survey showed this turnaround was linked to improved demand conditions and awards related to new projects.

Manufacturing employment increased marginally in March, reversing the two-month streak of declines. Firms added full-time staff during the period and were able to reduce backlogged orders.

However, total new business volume slowed for the second consecutive month, and international demand for Malaysian goods weakened for the first time in three months. That said, the decline in new orders overall remained relatively small.

Ongoing fighting in the Middle East continued to weigh on supply chains and procurement activity. Companies reduced procurement activity for the first time in nine months, with the contraction being the most pronounced in nearly a year. Limited container availability, along with higher prices for raw materials and transportation, were cited as contributing factors.

Supplier performance deteriorated sharply, marking the steepest decline since May 2022. Longer lead times were attributed to the conflict in the Middle East.

Cost pressures intensified in March, with inflation rising at the fastest pace since October 2024. Higher shipping, energy, and materials costs—often stemming from the war—drove this increase. Output prices jumped sharply to a 45-month high.

Pre-production inventories fell at the fastest rate in 27 months, while finished goods inventories declined for the fourth consecutive month.

Business confidence for the one-year outlook in March fell to a seven-month low, dragged down by the continued war in the Middle East.

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