March’s industrial production (IP) rose by 3.1% y/y from 1.7% y/y in February. It was primarily supported by higher manufacturing output, up 4.1% y/y and a smaller decline in mining by -0.2% y/y while electricity came in at 4.8% y/y. Manufacturing was supported by resource-based activities with a moderates E&E in view of a maturing tech cycle.

Based on the latest set of figures, we expect 1Q2019 GDP to be weak. It should read around 4.1% with our downside at 3.8%. Underpinned by ongoing external headwinds, added with domestic issues, we believe the economy is likely to experience moderate growth in 2019. Our base case growth is 4.5% with the downside at 4.0%.

• March’s industrial production (IP) rose 3.1% y/y from 1.7% y/y in February. Growth was supported by higher output in manufacturing sector, up 4.1% y/y from 3.7% y/y in February and a smaller decline in mining sector at -0.2% y/y in March versus -5.0% y/y in February. Meanwhile, electricity came in at 4.8% y/y from 4.9% y/y in February.

• However, looking at the quarterly performance, IP grew at 2.7% y/y in 1Q2019 compared with 4Q2018’s 3.2% y/y. The manufacturing and mining sector reported 4.0% y/y and -2.0% y/y respectively from 4.5% y/y and -0.5% y/y in 4Q2018. Electricity rose 5.8% y/y in 1Q2019 from 2.9% y/y in 4Q2018.

• Nonetheless, the improvement in manufacturing activities in March was supported by resource-based activities i.e. petroleum products (3.7% y/y from 1.6% y/y). Likewise, textile (4.9% y/y from 3.6% y/y), and food, beverages & tobacco (6.8% y/y from 6.3% y/y) were higher.

• Production from electrical & electronic (E&E) products grew by 2.7% y/y in March from 3.1% y/y in February. The slower production is in tandem with the maturing tech cycle, reflecting the continuous decline in global semiconductor billings which read at -14.3% y/y in March versus -11.4% y/y in February.

Source: AmInvest Research - 13 May 2019