The manufacturing Purchasing Managers' Index (PMI) rose to 54.9 in December from 52.9 in November. It was also lower compared to the 55.7 reading posted a year earlier.
The index considers any score above 50 to be an improvement, while those below signify a contraction.
"Panellists commented on reduced volumes of new business".
"Malaysia's manufacturing sector observed a renewed decline in new orders at the end of the year".
Despite these additional resources and a slight uptick in stocks of finished goods, manufacturers' backlogs of work increased for an eighth successive month in December.
"With global growth expected to improve to a seven year high in 2018, we think that firms are right to be confident about their prospects for this year", Mr O'Sullivan said. In turn, new export orders rose at the quickest pace since June.
December's expansion was driven by a further uptick in new orders, which grew at the third-fastest rate in the survey's history and boosted jobs growth to record levels as the economy moves towards full employment. "Anecdotal evidence pointed to stronger market demand from home and worldwide markets", said Aashna Dodhia, economist at IHS Markit, which compiles the survey. Reflecting greater cost pressures, firms raised their output charges for the fifth month in succession.
Finally, the Future Output Index signalled the strongest level of confidence in three months, with more than one-in-five survey participants forecasting higher production.
Turning to margins, the report from Investec found that input costs rose at their fastest pace in nine months, with higher raw material costs widely mentioned by panellists.
"Businesses retained positive forecasts for outputover the next 12 months (on) projections of an improvement in underlying demand conditions", it noted.
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