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Malaysia's manufacturing Purchasing Managers' Index (PMI) fell to 47.4 in August from 47.6 in July.
IHS Markit who compiled the survey said in a statement, the PMI is broadly indicative of annual Gross Domestic Product (GDP) growth of approximately 4.5 per cent for Malaysia.
According to the London-based global information provider, the latest PMI data highlighted some of the challenges facing Malaysian manufacturers at the midway point of the third quarter, with the survey signalling tough demand conditions and rising cost pressures.
The survey also highlighted reduced workloads from clients in other key export markets and global trade war worries reported as drags on sales, reports Xinhua.
IHS Markit chief business economist Chris Williamson commented, the recent subdued Malaysian PMI readings in part reflect on-going global trade tensions, which have led to a weakening in the pace of economic expansion globally.
"The worldwide PMI surveys have indicated the slowest worldwide GDP growth for three years in recent months, led by falling manufacturing output," he added.
While the survey's latest data suggest some mild loss of momentum in the third quarter as current manufacturing conditions clearly remained challenging in August, he opined that the PMI remains consistent with steady annual GDP growth of 4.0 to 5.0 per cent for Malaysia in the third quarter.
"Encouragingly, Malaysia's manufacturers have become increasingly optimistic that the tide will soon turn and that demand will strengthen again in coming months," he said.
The survey also showed, optimism for the year ahead is now at its highest since late-2013, with Malaysian firms taking on more staff to meet the improved outlook and reporting new product launches to help drive revenues.