KUALA LUMPUR, April 1 -- Malaysia's manufacturing sector returned to growth in March for the first time in two months, but this positive development was overshadowed by severe inflationary pressures and weakening business confidence directly linked to the war in the Middle East.

The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers' Index (PMI) rose to 50.7 in March, up from 49.3 in February. A reading above 50.0 indicates an expansion in the sector, with the latest data showing the most marked improvement in nearly four years.

This growth was primarily driven by a modest rise in production and a slight increase in employment, as companies added more full-time staff to their payrolls.

However, the report highlig...