Industrial production (IP) rose slightly slower in January by 3.2% y/y following moderate growth from manufacturing which increased 4.2% y/y while mining output fell 0.9%. The moderate growth was supported by strong electricity output which climbed 7.8% y/y in January.

The downward pressure on manufacturing remains high as we move forward. The drag will come from the E&E segment where global semiconductor sales are softening. Our trade is also envisaged to ease on the back of a moderate export outlook, in tandem with a slower global growth. Thus we expect GDP for 2019 to grow around 4.5% with downside risk at 4.0% on the back of ongoing external noises and domestic challenges.

• Industrial production (IP) rose slightly slower in January by 3.2% y/y from 3.4% y/y in December. It comes about following moderate growth from manufacturing which increased 4.2% y/y from 4.4% y/y in December. Besides, mining output fell 0.9% from a gain of 1.0% y/y in December. Meanwhile, electricity output climbed 7.8% y/y in January from 2.7% y/y in December.

• The slower manufacturing output is not a surprise. As expected, the production from electrical & electronic products (E&E) rose 3.9% y/y versus 7.2% y/y in December. The global E& E cycle has peaked and is now on a softening trend. Furthermore, the manufacturing PMI is still in the contraction region. Forward manufacturing indicators have turned soft.

• Nonetheless, manufacturing activities in areas like resource-based improved (4.0% y//y from 3.6% y/y). Likewise, textile (5.4% y/y from 4.2% y/y), and food, beverages & tobacco (2.6% y/y from -1.1% y/y) were higher.

• The poor mining output is a result of the fall in crude oil output, down 2.2% y/y in January compared with a gain of 2.5% y/y in December while the natural gas output rebounded by 0.3% y/y from -0.2% y/y in December. Until the crude supply disruption in the Kebabangan gas field recovers by mid-2019, this segment of mining will remain subdued.

• The downward pressure on manufacturing remains high as we move forward. The primary drag will come from the E&E segment where global semiconductor sales are softening. Our trade is also envisaged to ease on the back of a moderate export outlook, in tandem with a slower global growth. Thus we expect GDP for 2019 to grow around 4.5% with downside risk at 4.0% on the back of ongoing external noises and domestic challenges.

Source: AmInvest Research - 15 Mar 2019