KUALA LUMPUR: The upswing in Malaysia's manufacturing sector is expected to sustain this year, after its monthly sales grew fastest in over a year in April, given the prevailing favourable economic conditions, economists said.
Malaysian Institute of Economic Research economist Dr Shankaran Nambiar expects the sector's resurgence to continue with export particularly maintaining its momentum.
He said this is particularly driven by the semiconductor upswing, thus contributing to an increase in trade numbers.
"Nevertheless, we are observing increases in raw material prices and imports, as we witnessed in previous quarters, which may continue their uptrend," he told Business Times.
Nambiar added that global demand for manufactured goods may be better than expected and that there is greater-than-expected resilience in the US economy.
He highlighted that the figures for the last quarter were better than expected.
"As for China, the government's fiscal support was encouraging and that helped the economy. The measures that have been introduced to help the property sector may take time to bear fruit, but they are heading in the right direction," he said.
Expressing similar views, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid pointed out that the manufacturing sector performed well in April, with sales up 5.7 per cent compared to 1.4 per cent in the previous month.
He said as sales are rising, production activities were also higher by 4.9 per cent from 1.3 per cent previously.
"Both export-oriented and domestic-oriented industries were growing rapidly in April, at rates of 2.6 per cent (compared to 0.5 per cent in March 2024) and 9.5 per cent (compared to 3.1 per cent in March 2024), respectively.
"On that note, the sector is likely to accelerated further this year as improving global demand along with livelier domestic activities will propel the growth of the manufacturing sector," he added.
However, Afzanizam said rising cost of doing business has always been the main challenge for the manufacturers which include labour, raw material, machinery and equipment.
He noted that the adoption of sustainable practices, which increases compliance costs, along with geopolitical risks, will pose a serious challenge to supply chain management.
"Nevertheless, I believe that this might encourage the manufacturers to really go for automation and digilatisation that will help their business model to be more nimble and agile especially in respect to cost management.
"Manufacturers will remain cautious as to not over produce as they want to maintain a very lean inventory level," he said.
In April 2024, the sales value of Malaysia's manufacturing sector expanded by 5.7 per cent year-on-year (YoY) to RM153.2 billion.
Chief statistician Datuk Seri Dr Mohd Uzir Mahidin said this marked the highest growth in 13 months due to a lower value base effect.
The increase was mainly driven by sales in the sub-sectors of transport equipment and other manufactures (16.9 per cent), non-metallic mineral products, basic metal and fabricated metal products (12.8 per cent), as well as electrical and electronics products (2.7 per cent).
Compared to the previous month, the sales value in the manufacturing sector saw a decline of 3.3 per cent, dropping from RM158.4 billion.
For the initial four months of 2024, the manufacturing sector's sales value totalled RM610.6 billion, marking a 2.7 per cent increase compared to the corresponding period the previous year.
During the period, the number of employees went up by 1.0 per cent to a total of 2.37 million persons, while salaries and wages grew 1.2 per cent to RM32.9 billion.
As a result, the sales value per employee reached RM257,337, registering a growth of 1.7 per cent.
