KUALA LUMPUR, April 1 ― Malaysian manufacturers have expressed optimism about the outlook for output in the coming year, although the overall degree of sentiment waned to the softest since last October.

S&P Global said while many companies attributed optimism to hopes that national and international pandemic restrictions would lift and aid recovery in demand, other firms were concerned that the war in Ukraine would further exacerbate price and supply pressures and continue to hold back a strong improvement in operating conditions.

Chief business economist Chris Williamson said March saw manufacturers once again struggled against the headwinds of high Covid-19 infection rates, supply chain delays, staffing shortages and rising costs, the impact of which was exacerbated by rising geopolitical uncertainty caused by the Ukraine invasion.

"The war has not only added to global supply disruptions and led to a surge in energy and other commodity prices, but also has driven a further cooling of global demand.

"While coming months should see the headwind from the pandemic continuing to ease, it's clear that many producers are worried that the crosswind from the war will subdue the rebound from the latest Covid-19 wave,” he said.

The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers’ Index fell to 49.6 in March from 50.9 in February, with the latest reading pointed to a slight deterioration in the health of the sector that was the first since September 2021.

In a separate research note, S&P Global said operating conditions across the Asean manufacturing sector improved modestly in March, thereby extending the current sequence of expansion to six months, according to the latest PMI data.

It said further increases in output and new orders supported the headline PMI.

"That said, manufacturers saw another slide in workforce numbers. Meanwhile, continuing disturbances in supply chains led to stronger inflationary pressures,” S&P Global said.

The headline PMI posted 51.7 in March, down from 52.5 in February. The latest data indicated a loss of growth momentum as the pace of improvement in the health of the Asean manufacturing sector slowed for the second month in a row and was the softest for six months.

S&P Global economist Maryam Baluch said the headline PMI figure signalled a loss of growth momentum in the ASEAN manufacturing sector, as output and new order expansions softened.

"Output growth remained constrained as supply-side issues persisted. That said, the softer upturn in production stemmed in part from a slower expansion in new orders,” she said.

Meanwhile, cost pressures worsened, with input price inflation rising to a record high. Thus, manufacturers again lifted their average selling charges, in a bid to protect profit margins.

"While overall sentiment remained positive, underlying data point to headwinds. The sector continues to be hampered by ongoing supply problems and a widespread scarcity of materials, which is expected to continue over the course of the year,” Baluch added. ― Bernama