KUALA LUMPUR: Malaysia's manufacturing purchasing managers index (PMI) expanded to 51.6 in April from49.6 in March, indicating a renewed improvement in the health of the sector.

       "April saw a welcome surge in demand for manufactured goods with producers reporting the strongest inflow of new orders for eight years, reflecting a combination of improving sales at home and abroad.

       “However, supply constraints in terms of both labour and component availability remain a major headwind to the economic recovery and meant manufacturers and their suppliers were again unable to meet demand on average, which is in turn putting sustained upward pressure on prices,” S&P Global chief business economist Chris Williamson said in a statement.

       He added that concerns over supply chain delays have meanwhile been further fanned by lockdowns in China and the Ukraine war, leading to a pull-back in business optimism about the outlook.

       "In short, manufacturers are seeing signs of reviving demand but their efforts to boost production to meet these new orders continue to be frustrated by shortages, which will likely put further pressure on inflation in the coming month,” Williamson said.

       Looking at the historical relationship between the PMI and official statistics, the latest reading is representative of continued expansions in manufacturing production and GDP, though the survey suggested that growth was again held back by sustained supply chain issues, according to the rating agency.

       It said the uptick in the headline figure was led by a sharp recovery in new order volumes, with growth of new business hitting an eight-year high.

       Firms noted that stronger client confidence had boosted demand in both domestic and external markets.

       Concurrently, new export sales returned to expansion territory for the second time in three months, albeit only marginally.

       S&P Global said April data suggested that output was scaled back for the fourth month running. That said, the rate of moderation softened from March and was only mild.

       Firms commonly attributed muted production to difficulty sourcing and receiving inputs amid material shortages and delivery delays as well as staffing shortages.

       Despite the rise in incoming business, firms highlighted a renewed fall in outstanding business during April as firms reportedly made efforts to clear backlogs.

       Meanwhile, a fourth consecutive fall in employment levels was recorded, as Malaysian businesses continued to report difficulty obtaining foreign work permits for staff from abroad due to ongoing border restrictions.

       “Looking ahead, Malaysian manufacturers remained optimistic regarding the year-ahead outlook for output amid hopes demand conditions would improve once the pandemic was under control globally,” S&P Global said.

       Expectations nevertheless dipped to an eight-month low, mainly over concerns that price rises and material shortages could continue to hinder production levels.