Manufacturing growth momentum set to sustain

PETALING JAYA: Malaysia’s industrial activity is expected to carry its momentum into the coming quarters, underpinned by firmer manufacturing conditions and resilient demand drivers despite lingering external risks.

The outlook followed a stronger-than-anticipated showing in recent months, with forward indicators suggesting that industrial expansion had room to broaden into 2026.

Kenanga Research, for one, said 2025 manufacturing growth could exceed its 3.9% projection (2024: 4.3%), noting that momentum is anticipated to remain intact as the sector benefitted from a resilient electrical and electronics (E&E) segment.

The research house highlighted that manufacturing output expanded by 4.3% in the first 10 months of the year, exceeding its internal estimates, and pointed out that momentum should sustain in the near term as high-frequency indicators point to stronger activity.

Kenanga Research pointed to November’s manufacturing purchasing managers’ index (PMI) returning to expansion at 50.1, which it said signalled firm domestic manufacturing momentum, defying expectations of a slowdown despite higher US tariffs.

It attributed support to factors including the US-Malaysia Accelerated Revenue Transformation deal, improved US-China relations, and robust global demand for E&E products linked to artificial intelligence, 5G and electric vehicles.

According to Kenanga Research, it has been reported that global semiconductor sales had been upgraded to US$772.2bil and US$975.4bil for 2025 and 2026, respectively, which should support Malaysia’s exports going forward.

On the macro front, it revised its 2025 gross domestic product (GDP) growth forecast to 4.8% from 4.5% and projected higher fourth-quarter growth of 5%.

Hong Leong Investment Bank (HLIB) Research took a more cautious global view, noting that global manufacturing PMI edged down to 50.5 in November (October: 50.9) amid weaker international trade, but said Malaysia’s October industrial production index (IPI) marked its strongest growth since September 2022.

HLIB Research stated that Malaysia is well-positioned to weather global economic turbulence on the back of its diversified economic structure and resilient domestic demand. The research house maintained its expectation for Bank Negara Malaysia to keep the overnight policy rate at 2.75% until end-2026.

TA Research said Malaysia’s overall industrial output expanded by 3.4% year-on-year in the January to October period, driven by manufacturing and a rebound in mining.

It highlighted that business confidence in November reached its highest level since 2013, although it cautioned that sustaining momentum into 2026 would depend on navigating risks including geopolitical tensions, exchange-rate fluctuations and softer growth in key markets.

Apex Securities Research said the recent strength in the external sector exceeded its expectations, supported by easing tariff concerns and strong global semiconductor demand, but warned that spillovers from existing US tariffs could become more pronounced next year.