Kuala lumpur: Apex Securities maintained its 2026 manufacturing growth forecast at 4.5 per cent year-on-year, unchanged from last year's forecast, as production growth is expected to moderate when stockpiling activity unwinds and the high base from last year's strong performance in the second half of 2025 kicks in. Manufacturing production grew at a robust 6.4 per cent year-to-date.

According to BERNAMA News Agency, the brokerage noted that it remained cautious on the outlook for the second half of 2026 as the manufacturing Purchasing Managers' Index (PMI) in May indicated that firms kept purchasing activity broadly unchanged, suggesting a pause after two consecutive months of inventory frontloading. Manufacturers also continued to report higher input costs due to the West Asia conflict, although the pace of input cost inflation has started to ease.

Apex Securities expressed concerns over the lagged impact of elevated material and logistics costs, with the Producer Price Index (PPI) rising further to 7.8 per cent year-on-year in May, compared to 5.4 per cent in April. Additionally, there are uneven supply disruptions across sectors. The Industrial Production Index (IPI) extended its strong momentum, rising 8.4 per cent year-on-year in May from 8.2 per cent in April, driven by a sharp acceleration in mining output of 19.8 per cent but partly offset by moderating growth in manufacturing and electricity output.

Meanwhile, Hong Leong Investment Bank (HLIB) believed the softness in the domestic-oriented segment was partly idiosyncratic and that motor vehicle production should normalise as production resumes. While domestic demand remained supported by government measures, the uptrend in the electrical and electronics (E and E) sector points to sustained strength in manufacturing and export activity. HLIB also noted the presence of external risks, underscored by the recent re-escalation of US-Iran tensions, maintaining their 2026 gross domestic product growth forecast at 4.7 per cent.