KUALA LUMPUR, April 1 — Malaysia’s Manufacturing Purchasing Managers’ Index (PMI) rose to 50.7 in March 2026, the highest in nearly four years, from 49.3 in February 2026, S&P Global said in a statement today.
It added that, per the historical relationship between the PMI and official gross domestic product (GDP) data, the latest figures suggest the GDP would grow around 5.5 per cent on-year.
The rating agency said central to the uptick in the headline index was a fresh rise in production in March. Output rose modestly, but at a pace that was most pronounced since December 2021.
“The upturn was linked to improved demand conditions and new tender wins,” said S&P Global, adding that goods producers in Malaysia recorded a fractional rise in employment in March.
On total new business, it moderated for a second consecutive month in March, but the rate of decrease was broadly unchanged last month and shallow overall.
Concurrently, international demand for Malaysian goods softened for the first time in three months, albeit only slightly.
Nonetheless, subdued demand conditions resulted in firms lowering their purchasing activity in March, the first in nine months.
“Limited shipment container availability and higher prices for raw materials and deliveries resulting from the war in West Asia were also reasons cited,” the ratings firm said.
Reduced buying activity and longer lead times for inputs resulted in firms turning to their holdings to meet production requirements. The downturn in pre-production inventories was the sharpest in 27 months.
Moreover, holdings of finished items were reduced for a fourth straight month in March.
The second straight monthly increase in costs was strong in March. Additionally, the pace of inflation was the fastest since October 2024, with higher transport, energy and material costs, often stemming from the war in West Asia, were the primary factors behind the latest increase.
S&P Global said sentiment for the year ahead for output eased further to a seven-month low in March, while optimism was supported by hopes that the demand environment would improve, confidence was severely dampened by the ongoing war in West Asia.
Meanwhile, Kenanga Investment Bank Bhd said the March rebound suggests February’s weakness was largely seasonal as activity has normalised and should extend into April.
However, demand remains uneven. Rising logistics, energy and raw material costs due to West Asia tensions will remain a key headwind and could limit the pace of recovery.
Overall, manufacturing performance will hinge on whether demand can outpace rising costs.
“We maintain our 2026 GDP forecast at 4.5 per cent. Risk remains tilted to the downside given ongoing West Asia tensions that could disrupt global energy and transportation costs.
“Still, domestic demand and continued support from the electric and electronic sector should underpin growth,” the investment bank said.
