Malaysia's manufacturing activity remained in contraction in July but shrank at a softer pace than the previous month, S&P Global said in a report Friday.

The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers' Index rose to 49.7 in July from 49.3 in June, remaining below the 50 mark that separates contraction from expansion.

Firms saw only a slight drop in new orders at the start of the third quarter, supported by a pickup in export sales for the first time since last November. This led to the gentlest slowdown in production volumes in five months, S&P said.

On the price front, the rate of input cost inflation rose for the third straight month in July, hitting its highest level since November 2024.

Looking ahead, the optimism of Malaysian manufacturers was the highest in five months, the report said.