PETALING JAYA: Malaysian manufacturing companies reduced their payroll numbers in May for the first time in seven months amid a continued deterioration in the operating conditions, according to a IHS Markit survey. The reduction in payroll numbers was attributed to cost-cutting measures and poor demand conditions. "At the same time, backlogs continued to reduce in May. Lower volumes of new work enabled a timely completion of unfinished business, according to anecdotal evidence." Malaysia's manufacturing sector deteriorated in May for the fourth consecutive month, mainly due to the sharpest fall in new business since December 2016 due to lacklustre demand. The headline Nikkei Malaysia Manufacturing Purchasing Managers' Index, a composite single-figure indicator of manufacturing performance, fell from 48.6 in April to 47.6 in May, which indicated the strongest deterioration in operating conditions since June 2017. New export orders also fell for the fourth successive month in May. On the price front, input cost and output charge inflation eased to the slowest since October 2016 and February respectively. Despite easing slightly from April's recent high, Malaysian manufacturers retained strong projections for output in the year ahead, with business sentiment staying above the historical average. "Optimism was rooted in hopes that the new government will spur business activity and improve demand conditions." IHS Markit economist Aashna Dodhia said the latest survey data suggested that weak demand emanated from both domestic and foreign markets. "In response to lower output requirements, firms were discouraged from engaging in input buying and job recruitment. However, on the price front, manufacturers felt some respite around inflationary pressures with input cost inflation easing to the weakest since October 2016." FXTM's global head of currency Strategy & Market Research Jameel Ahmad said the news that new orders fell the most since late 2016 suggests that the manufacturing sector could struggle for some time. However, he said it is too early to say whether the manufacturing woes could weigh on the gross domestic product potential and investors will be waiting for the key trade data to be announced today for guidance on how the Malaysian economy did in the second quarter of 2018.