According to the latest data report released by financial analysis firm S&P Global on the 4th, the S&P Global Malaysia Manufacturing Purchasing Managers' Index (PMI) rose to 51.6 in April 2026, up from 50.7 in March. This marks the highest level in four years, indicating a moderate improvement in the overall operating conditions of Malaysia's manufacturing sector.

The data shows that the index has remained above the 50-point threshold that separates expansion from contraction for two consecutive months. Analysis suggests that the conflict in the Middle East drove sales prices to a record high, prompting businesses to increase their safety stock levels, thereby supporting growth in production and new orders.

Despite the positive PMI data, which is favorable for manufacturing output, the survey indicates that the April recovery was partly due to businesses undertaking passive inventory replenishment driven by uncertainties related to the Middle East situation. After slowing for two consecutive months, new orders resumed growth in April. Surveyed companies widely reported that against a backdrop of rising price expectations and general uncertainty, clients tended to make bulk purchases to build safety stocks.

In contrast, new export orders declined for the second consecutive month, with the rate of contraction accelerating compared to March, reflecting the dampening effect of the Middle East conflict on external demand.

Data indicates that manufacturing output increased for the second month in a row in April, with the growth rate being the fastest since December 2021. Companies generally attributed the growth to strategic inventory accumulation by both themselves and their clients, while shortages of raw materials and rising costs also impacted production.

To meet rising production demands, manufacturers expanded their workforce. Although the increase in employment was modest, it was the most significant seen so far this year. However, the additional hiring was still insufficient to clear backlogs, as outstanding work increased slightly. Companies also attributed this to constraints in raw material supplies.

Purchasing activity returned to growth in April after a slight dip in the previous month, with inventory accumulation remaining a primary driver. Simultaneously, delays in the delivery of inputs intensified, reaching the most severe level in nearly four years, a situation widely linked by firms to the Middle East situation.

Amid these supply delays, pre-production inventories fell for the tenth consecutive month, although the rate of decline slowed to its lowest in three months. In contrast, stocks of finished goods saw a noticeable rebound, registering their first increase in five months, with some of the new output being allocated to inventory building.

Influenced by rising energy and raw material costs, input cost inflation accelerated in April to a 45-month high. In response, companies raised their selling prices substantially, with the rate of increase hitting a record high.

However, business confidence among manufacturers continued to weaken, with optimism dropping in April to its lowest level in eight months, remaining generally low by historical standards. The Middle East situation was cited as a significant drag on future expectations.

An economist at S&P Global commented that the latest PMI data shows the Middle East conflict significantly impacted Malaysia's manufacturing sector in April. Companies drove faster production growth through inventory building, allocating some output to increase finished goods stocks. Concurrently, clients increased purchases for similar reasons, leading to a recovery in new orders. Despite output price inflation reaching a record high, both businesses and clients continued to build safety stocks. Purchasing activity increased as firms managed rising cost pressures, but raw material inventories continued to decline due to supply chain disruptions.

Looking ahead, sector performance will partly depend on developments in the Middle East. However, the latest data suggests manufacturers are actively mitigating related shocks through measures such as increasing inventory levels.