Malaysia Manufacturing Returns to Growth as June PMI Rebounds Above 50

Malaysia’s manufacturing sector returned to expansion in June as stronger orders and production lifted PMI above 50, although cautious hiring, supply disruptions, and global uncertainties continued tempering momentum.

Malaysia Manufacturing Regains Momentum

Malaysia’s manufacturing sector regained momentum in June, marking its return to expansion after a brief slowdown, according to the latest S&P Global Manufacturing Purchasing Managers’ Index (PMI) reviewed by MBSB Research.

The headline PMI climbed to 50.7 in June from 49.0 in May, moving back above the neutral 50-point threshold that separates expansion from contraction. The improvement was largely driven by a rebound in new orders and stronger production output, signalling healthier business conditions as the first half of 2026 concluded.

Despite the recovery in demand, manufacturers remained cautious in expanding capacity. Companies largely kept hiring and purchasing activity unchanged, reflecting a wait-and-see approach amid lingering uncertainty.

While some firms increased inventories of raw materials to support incoming orders, others maintained restrained purchasing due to uneven demand across industries.

Supply chain challenges also persisted during the month. Material shortages and ongoing geopolitical tensions contributed to slower supplier delivery times, adding pressure to production schedules and limiting the pace of broader recovery.

On the cost front, manufacturers received some relief as input cost inflation eased to its lowest level in three months. The moderation in production costs enabled businesses to increase selling prices at a faster pace than in May, helping protect profit margins despite supply-side challenges.

Looking ahead, MBSB Research expects improving new orders to continue supporting manufacturing output in the coming months. Lower oil and energy prices are also anticipated to moderate production costs further.

However, prolonged supply disruptions and material shortages remain key risks that could prevent inflationary pressures from easing more significantly and temper the sector’s recovery trajectory.