Manufacturing Sector Returns to Growth Despite Rising Costs

KUALA LUMPUR — Malaysia’s manufacturing sector showed renewed resilience in March 2026, with the S&P Global Manufacturing PMI climbing to 50.7, its highest level in nearly four years. This marked a return to expansionary territory, driven by the fastest rise in production since late 2021 and supported by stronger domestic demand and new tender wins. Employment also stabilised, ending two months of job cuts.

Manufacturing Sector

However, external challenges remain: new orders moderated for the second month, international demand softened, and firms scaled back purchasing while relying on inventories. Input cost inflation surged to its highest since October 2024, largely due to energy and raw material price shocks from the Middle East conflict. Output prices rose to a 45‑month high, squeezing margins and dampening business sentiment to a seven‑month low. While industrial production grew 5.9% year‑on‑year in January, analysts caution that elevated costs may constrain near‑term momentum.

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