Kuala lumpur: Malaysia's Manufacturing Purchasing Managers' Index (PMI) rose to 50.7 in March 2026, the highest reading in nearly four years, from 49.3 in February 2026.
According to BERNAMA News Agency, SandP Global said in a statement today that, as per the historical relationship between the PMI and official gross domestic product (GDP) data, the latest figures suggest that GDP will grow around 5.5 percent year-on-year.
The rating agency indicated that the uptick in the headline index was driven by a fresh rise in production in March. Output increased modestly, reaching a pace not seen since December 2021. SandP Global mentioned that the upturn was linked to improved demand conditions and new tender wins. Additionally, goods-producing firms in Malaysia saw a slight rise in employment during March.
Total new business moderated for a second consecutive month in March; however, the rate of decrease was broadly unchanged and shallow overall. International demand for Malaysian goods slightly softened for the first time in three months. Subdued demand conditions led firms to lower their purchasing activity in March, the first reduction in nine months.
The report noted issues such as limited shipment container availability and higher prices for raw materials and deliveries resulting from the war in West Asia. Consequently, reduced buying activity and longer lead times for inputs made firms rely on their inventory to fulfill production needs. The downturn in pre-production inventories was the most significant in 27 months, and holdings of finished items were reduced for a fourth consecutive month.
March saw a second straight monthly increase in costs, with the pace of inflation being the fastest since October 2024. Higher transportation, energy, and material costs, often resulting from the war in West Asia, were identified as the primary factors behind the latest increase. SandP Global highlighted that the sentiment for the year-ahead outlook for output eased further to a seven-month low, with optimism supported by hopes for improved demand, though confidence was dampened by the ongoing conflict in West Asia.
Meanwhile, Kenanga Investment Bank Bhd remarked that the March rebound indicates that February's weakness was largely seasonal, with activity normalizing and expected to continue into April. However, demand remains uneven, with rising logistics, energy, and raw material costs due to Middle East tensions posing a significant challenge that could limit the pace of recovery.
The investment bank maintained its 2026 GDP forecast at 4.5 percent, though it acknowledged that risks remain tilted to the downside given the ongoing tensions in West Asia that could disrupt global energy and transportation costs. Nonetheless, it noted that domestic demand and continued support from the electric and electronic sector should underpin growth.