There was a decline in new orders at the end of last year, although marginal, with business conditions in the manufacturing sector stagnating in December.

The main reason for this was weak domestic demand.

Other Asean nations, too, faced a similar situation. Data show that output growth slowed and new orders failed to expand for the first time in five months in Asean overall.

According to Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI), output growth also slowed to a modest pace in December.

The Nikkei Malaysia Manufacturing PMI – a composite single-figure indicator of manufacturing performance – fell from 52.0 in November to 49.9 in December.

This signalled a broad stagnation, following the strongest growth in over three-and-a-half years in the previous month, according to a press release by IHS Markit, which compiled the manufacturing PMI data.

IHS Markit said outstanding business declined for a seventh successive month during December, providing evidence of “ongoing spare capacity” in the manufacturing sector.

Also, purchasing activity decreased during December, with the rate of deterioration being the strongest since September. This was due to subdued demand.

Commenting on the manufacturing PMI data, Aashna Dodhia, economist at IHS Markit, said: “Operating conditions in Malaysia’s manufacturing economy broadly stagnated in December, following an improvement in November. The goods-producing sector observed a renewed fall in new orders amid reports of weak demand conditions in the domestic market.

“On a positive note, international demand for Malaysian goods continued to increase during December. That said, the rate of expansion slowed from November’s 46-month high to a slight pace.”

However, despite the problems faced, firms increased the number of employees to meet production requirements, even if only very slightly.

On the price front, Dodhia said, input cost inflation remained sharp overall and continued to place pressure on firms’ margins. Weak domestic demand was reported as the key reason behind lower volumes of new business, as new export orders rose for the second month in succession.

International demand for Malaysian goods increased from key markets, including Thailand and the Middle East.

IHS Markit said there was a general increase in raw material prices, resulting in firms raising their average selling prices to pass on some of these burdens to clients.

Despite this, it said, businesses retained positive forecasts for output over the next 12 months.