In a statement today, S&P Global Market Intelligence economist Usamah Bhatti said Malaysian firms began to see demand conditions turn a corner in February.

This is because there were only slight moderations in output, while total new orders and exports indicated that firms mentioned pockets of demand building up in the manufacturing sector.

“Further encouragement came from a broad stabilisation in backlogs of work, a sign that capacity pressures were also starting to build.

“At the same time, employment levels were broadly unchanged, as efforts to reduce costs by lowering headcounts were offset by the hiring of new full-time staff,” he said.

Usamah added that on top of that, there were indications of a pick-up in cost inflation in February, but it was far removed from the pace recorded in the three years following the Covid-19 pandemic.

He said that firms raised their selling prices only slightly over the month amid reports that some manufacturers reduced charges in an attempt to stimulate sales.

S&P said higher operating expenses reflected increased raw material costs and currency weakness.

“Despite this, output charges were raised only fractionally in February, and at the slowest pace in the current seven-month sequence amid anecdotal evidence that some firms cut prices in an attempt to stimulate sales,” it said.

S&P said the historical relationship between the PMI and official data suggests that both gross domestic product (GDP) and manufacturing production are set to trend upwards and improve modestly in the first quarter of 2024.

“Optimism regarding the year-ahead outlook for output eased to a six-month low in February.

“Confidence was supported by hopes that the demand environment would improve and price conditions would stabilise,” it added.