Malaysia’s manufacturing sector is expected to remain on an expansionary path in the coming months.
This will be supported by resilient domestic demand and a gradual improvement in external orders, according to Kenanga Research.
The firm noted that the Manufacturing Purchasing Managers’ Index (PMI) held steady at 50.7 in July.
“The reading shows manufacturing entered the second half of 2026 on a stable footing, despite lingering geopolitical uncertainty and external headwinds,” it said in a note.
Kenanga Research said a reading above the 50 – point threshold indicates expansion in manufacturing activity.
The firm said the sustained increase in new orders, which rose at the fastest pace in eight months, bodes well for production in the coming months.
This will be driven by repeat business, stronger demand, new product launches and fresh tenders.
However, it noted that manufacturers remained cautious, with business confidence easing to a three-month low while employment continued to decline due to resignations, layoffs and cost-cutting measures.
“The July PMI indicates manufacturing conditions should stay supportive in the near term, backed by resilient domestic demand and improving external orders.
“The sustained increase in new orders bodes well for production over the coming months.
“Still, weaker business confidence and declining employment suggest manufacturers remain cautious amid persistent geopolitical risks,” it said.
Kenanga Research said cost pressures eased further, with input cost inflation slowing to its weakest pace in five months.
Output price inflation also moderated, indicating firms continued to absorb part of higher fuel, transportation, freight and raw material costs rather than passing them fully to customers.
Kenanga Research said the PMI reading also supports a positive contribution from the manufacturing sector to Malaysia’s third-quarter (Q3) economic growth.
“The latest data strengthen the case for an upward revision to our Q3 gross domestic product (GDP) growth forecast, which could push full – year 2026 GDP growth above 5% from our current projection of 4.5 to 5.0 %,” it added.
- New Straits Times