KUALA LUMPUR, Sept. 4 (Xinhua) -- Malaysia's manufacturing sector weakened in the first half of 2026 as softer domestic and export demand weighed on business activity, production and capacity utilization, while sharply higher production costs added to operating pressures, a survey by the Federation of Malaysian Manufacturing (FMM) showed on Thursday.
Findings from FMM's latest business conditions survey showed the general business activity index fell to 90 in the first half of 2026 from 103 in the second half of 2025, falling below the growth-neutral level of 100.
Local and export sales indices declined to 82 and 85 from 94 and 93, respectively, while production volume and capacity utilization both fell to 94 from 102.
At the same time, the production cost index rose sharply to 163 from 146, with 69 percent of respondents reporting higher costs.
Manufacturers have also turned more cautious about the second half of 2026, with expected business activity at 93. Local and export sales are projected at 88 and 92, while production volume and capacity utilization are forecast at 99 and 98, respectively.
Cost pressures are expected to remain elevated, with the production cost index projected at 156 and 63 percent of respondents anticipating further increases.
Higher raw material and intermediate input costs were the top challenge for businesses, cited by 53 percent of respondents, followed by the Middle East conflict, Red Sea disruptions and higher war-risk costs at 45 percent. ■