Malaysia's manufacturing sector to support economic growth in Q4: MBSB IB

KUALA LUMPUR: Malaysia's manufacturing sector is expected to continue supporting industrial production and overall economic growth in the fourth quarter of 2026 (Q4 2026), according to MBSB Investment Bank Bhd (MBSB IB).

In a note today, MBSB said the positive outlook is supported by the strong new order growth, improving export demand and sustained hiring backed by Malaysia's stronger-than-expected gross domestic product (GDP) growth of 5.3 per cent year-on-year in the third quarter of 2026 and a 53.7 per cent year-on-year expansion in trade in September.

It said Malaysia's S&P Global Manufacturing Purchasing Managers' Index (PMI) rose to 51.0 in October 2026 from 49.9 in September, returning to expansionary territory and marking the strongest improvement in manufacturing conditions since April 2026.

"The latest PMI reading signals continued growth in industrial production and overall economic activity in Q4 2026," it said.

The investment bank said stronger demand had encouraged firms to increase purchasing activity and sustain employment growth for a third consecutive month.

It said input cost inflation had accelerated due to higher transportation and raw material costs, partly linked to the West Asia conflict, prompting manufacturers to raise selling prices.

Nevertheless, MBSB IB said that rising input costs, persistent supply-chain disruptions and weaker business sentiment remain key downside risks.

"Ongoing geopolitical tensions in Middle East and elevated transportation costs could continue to exert pressure on manufacturers' margins and contribute to higher producer price inflation moving forward," it said.