The slower business activity for Malaysian manufacturers in the second half of last year will most likely translate to a cautious outlook for the first half of 2016.

But this does not mean that all is lost, said Federation of Malaysian Manufacturers president Saw Choo Boon.

In a press conference at FMM-MIER’s business conditions survey for the second half of 2015, Saw told the media present not to only paint “doom and gloom”.

“We are cautious, there are challenges, (and you) can't pretend it's going to be easy. But we don't want to create alarm.

"We hope things would be better because instilling confidence is very important. We are cautious but not despondent,” he said.

The semi-annual survey, the most recent one carried out from Dec 16, 2015 to Jan 22, 2016, is an economic indicator of the manufacturing sector’s business confidence.

Richard Wong, chairperson of the FMM-MIER business conditions survey committee, said that the second half of last year found that there was lower cost of production.

However, the general business conditions were the lowest since the survey started in 2012.

Local and export sales were weaker, production volume and capacity utilisation lower and employment slowed down.

Biggest challenge

The biggest challenge for the 275 respondents surveyed, on the other hand, was the depreciation of the ringgit, said Wong.

When asked to comment on this further, Saw later admitted that ringgit depreciation was undoubtedly a challenge for manufacturers as it had increased the cost of imports.

“This, of course, affects consumer spending (as) quite a number of goods for consumers are imported and a lot of our manufacturers do import components from overseas.

“For those who are manufacturing, especially for the local market, this would mean their production costs would increase,” he added.

Although it would be difficult for the government to maintain the level of the ringgit, Saw said there were factors that the government had control of.

“If they can help stabilise the level of the ringgit, it would ease the situation for manufacturers,” he said.

Commenting further on the lowered costs of production in the second half of last year, Saw said this showed how manufacturers have learnt to reduce operation costs by becoming more efficient.

Contending that businesses always faced increasing costs, Saw said most manufacturers were able to respond to the Goods and Services Tax (GST).

However, that did not give the government the “free license” to increase production costs, he said.

“So we hope for this year there will be no surprises, no sudden increase of unnecessary costs."

The government, he said, should defer such moves, if possible.