KUALA LUMPUR, Nov. 4 (Xinhua) -- Malaysia's manufacturing sector is expected to remain an important driver of economic growth in the near term, supported by stronger new orders and export demand, although rising input costs and supply chain disruptions could weigh on the recovery, according to analysts.
MBSB Research said in a note on Tuesday that the rebound in the manufacturing Purchasing Managers' Index (PMI) above the 50-point threshold indicated that factory activity had regained momentum at the start of the fourth quarter.
The seasonally adjusted S&P Global Malaysia Manufacturing PMI rose to 51 in October from 49.9 in September, marking the greatest improvement since April.
MBSB Research said stronger new orders, improving export demand and sustained hiring activity would support industrial production, underpinned by Malaysia's 5.3 percent year-on-year gross domestic product growth in the third quarter and a 53.7 percent increase in trade in September.
Kenanga Research said October's PMI performance had exceeded expectations and pointed to improving manufacturing conditions entering the fourth quarter, contrary to its earlier forecast of a slowdown. Stronger orders, renewed output growth, rising employment and better export demand should support industrial production.
However, the research house cautioned that some of the improvement could reflect exporters bringing forward shipments ahead of the year-end festive season, as well as purchases ahead of further energy-driven cost increases, which may not be sustained.
Meanwhile, PhillipCapital said stronger demand for artificial intelligence-related products contributed to the PMI improvement, while export data suggested that several other industries had also recorded stronger activity.
Analysts, however, also flagged rising input costs, persistent supply chain disruptions, geopolitical tensions and weaker business confidence as risks that could slow manufacturing expansion in the coming months. ■