The Federation of Malaysian Manufacturing (FMM) said manufacturing weakened in 1H26 after earlier stabilisation, based on its survey of 670 firms (72% SMEs). Weaker domestic and export demand pushed the business activity index down to 90 (from 103), with local sales at 82 and export sales at 85. Production and capacity utilisation fell to 94, while production costs surged to an index of 163 (69% reported higher costs). Despite this, investment (106) and employment (100) stayed resilient. Outlook for 2H26 is cautious—activity and sales are expected to remain below neutral and costs are likely to stay high—resulting in a modest, uneven recovery.
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