Kuala lumpur: Malaysia's manufacturing sector experienced a notable improvement as the headline manufacturing purchasing managers' index (PMI) climbed to a 20-month high of 50.2 in January 2026, up from 50.1 in December 2025. This marks the third consecutive month of growth, indicating a continued recovery in the sector's health.

According to BERNAMA News Agency, the improvement was driven by a renewed increase in production and stabilization in new factory orders. The appreciation of the ringgit also played a crucial role, leading to the first reduction in input costs since May 2020, while output prices saw only a modest rise in January 2026.

S and P Global Market Intelligence economist Maryam Baluch highlighted that the stronger PMI reflects strengthening business conditions for the third month in a row, with production returning to growth and demand conditions stabilizing. This positive trend is further supported by a resurgence in overseas demand.

Baluch also pointed out that companies reported an optimistic outlook, with confidence levels among the highest in the series' history. One significant aspect of the latest survey was the reduction in input costs, attributed to the stronger ringgit, which could potentially support growth in the near future.

In a related development, S and P Global reported a slight increase in the ASEAN manufacturing PMI to 52.8 in January 2026 from 52.7 in December, driven by strong output and new orders. Baluch noted that business confidence in the ASEAN manufacturing sector reached its highest point since April 2023, indicating expectations of continued growth.

She further mentioned that the signs of pressure on capacity suggest potential for accelerated job creation, as firms have already increased purchasing activity to meet higher production demands. However, the sector faces challenges as inflationary pressures rise, with input costs and output charges increasing. Baluch cautioned that further inflation could threaten the growth outlook, emphasizing the importance of monitoring inflation moving forward.