Manufacturing Sector Poised For Continued Growth In 2H2024 - FMM

The manufacturing sector is poised for continued growth in the second half of 2024 (2H2024), bolstered by global economic recovery and supportive domestic policies, after delivering a commendable performance in 1H2024, said the Federation of Malaysian Manufacturers (FMM).

Its president Tan Sri Soh Thian Lai said manufacturers are gearing up to meet rising demand, both domestically and internationally, aided by the appreciation of the ringgit.

“If the ringgit can move from the current level of 4.30 to 4.00-4.20 against the US dollar by year-end, this will not only be good for exporters but also domestic producers, as the cost of operation and selling price of products can be reduced,” he told reporters at the FMM Business Conditions Survey for 1H2024.

Soh said the general business activity index forecast rose significantly from 92 to 106, reflecting increased confidence among respondents.

This optimism is driven by economic recovery -- particularly in key export markets like the United States (US) and Europe -- as well as supportive domestic policies that are fostering industrial growth.

Meanwhile, on the revenue growth outlook for 2024, he said Malaysian manufacturers are cautiously optimistic amidst the challenging economic setting.

According to the FMM Business Conditions Survey for 1H2024, 50% of respondents expect their revenue to grow, driven by factors such as global economic recovery and resilient domestic demand.

At the same time, 21% foresee no change, and 29% expect their revenue to decline due to concerns over rising operational costs, persistent inflation and global economic uncertainties.

On profit growth, Soh said that manufacturers expressed cautious optimism due to rising costs and market volatility, with 42% of respondents expecting profit increases, 21% anticipating no change in profits and 31% foreseeing declines.

According to the survey, the general business activity index increased by 4.9% in 1H2024, reflecting continued stability and improving sentiment within the manufacturing sector.

Of the 616 respondents, 26% enjoyed higher sales in 1H2024, while 42% saw steady sales, attributed to continuous demand from abroad despite global economic uncertainties.

However, due to rising inflation and increased cost of living in 1H2024, the latest local sales index declined by 5.8% to 81 from 86 previously, indicating weaker domestic demand.

“Higher borrowing costs have further constrained purchasing power. These factors have likely led to a decrease in local sales as consumers prioritise essential goods over discretionary purchases,” added Soh.

Moving into 2H2024, businesses are seeing opportunities for product and market expansions.

“We hope the government will consider signing more Free Trade Agreements (FTAs), especially with the European Union (EU) because we need to compete.

“As manufacturers, we need to strengthen our competitiveness and technology. We have no choice. Vietnam has signed an FTA with the EU, and we hope Malaysia will too as this has been pending for the last 10 years,” added Soh.