Manufacturers say set to benefit from ringgit gains, but still months yet before price expected to drop

KUALA LUMPUR, Sept 2 — The recent appreciation of the Malaysian ringgit against the US dollar has brought positive news for the manufacturing sector and exporters, as it has led to cheaper import costs for raw materials.

However, consumers looking for immediate relief in the prices of goods may need to exercise patience, said Malaysian Manufacturers Federation (FMM) president Tan Sri Soh Thian Lai.

He said it could take at least three months before consumers see any reduction in goods prices.

He explained that this delay is attributed to the need for manufacturers to deplete existing inventories that were stocked when the ringgit was weaker.

“Typically, manufacturers have to fulfil pre-orders and procure raw materials in advance, which results in a backlog of inventories,” said Soh.

“Hence, it usually takes about three months to sell off products manufactured using the higher-cost materials.”

While expressing optimism over the ringgit’s recent performance, Soh said, the ideal exchange rate for manufacturers would be between RM3.80 to RM4.00 against the US dollar.

“This would not only improve profit margins but also enhance competitive positioning within the region," he said during the presentation of the 25th edition of the FMM Business Conditions Survey held at Wisma FMM today.

The survey revealed a 4.49 per cent increase in the general business activity index in the first half of 2024, reflecting an overall positive sentiment in the manufacturing sector.

However, the survey also reported a decline in the local sales index, which fell 5.81 per cent to 81 points from 86 in the same period last year.

The downturn was due to weaker domestic demand, driven by rising inflation and increased living costs that have curtailed consumer spending.

In contrast, the export sales index saw an increase, rising five points to 85 compared to the second half of 2023.

The uplift was attributed to robust international demand, particularly in key export sectors such as electronics and electrical products, as Malaysian manufacturers benefited from a recovering global economy despite ongoing uncertainties.

The FMM Business Conditions Survey, aimed at gauging business confidence, compiled responses from 616 participants nationwide between July 3 and August 9, 2024.