Industrial Production (IP) grew at slower-than-expected pace in July as mining output fell sharply even as manufacturing activity and electricity generation picked up pace. July’s reading was 1.2% y/y compared to 3.9% y/y in June. But the latest IP data fit together with trade figures released which showed a rebound of 1.7% y/y in July exports due to strong demand for electrical and electronic products.

Despite a positive showing by manufacturing output, the Nikkei Manufacturing Purchasing Managers’ Index (PMI) registered 47.6 in July, slipping from 47.8 in June, indicating that the overall manufacturing sector continued to endure a challenging business environment. It further fell to 47.4 in August 2019, suggesting that manufacturers are facing challenges at the midway point of 3Q2019 – tough demand conditions and rising cost pressures. These latest readings broadly indicate that the GDP growth for 2019 will be around 4.5%.

• Industrial Production (IP) grew at slower-than-expected pace in July as mining output fell sharply even as manufacturing activity and electricity generation picked up pace. July’s reading was 1.2% y/y compared to the 3.9% y/y in June. IP fell 0.4% m/m in July on a seasonally-adjusted basis.

• Interestingly manufacturing — which accounts for more than two-thirds of IP’s activity — helped to cushion the lower output from a major oilfield that is undergoing maintenance works. Output from the manufacturing sector rose 4% y/y in July, while electricity climbed 2% y/y but mining fell 8.4% y/y due to the decrease in the crude oil and condensate index. On a monthly seasonally-adjusted basis, manufacturing edged higher by 2.7% in July and electricity rose 4.5% while mining declined 10.9%.

• We found the latest IP data fit together with trade figures released which showed a rebound of 1.7% y/y in July exports due to strong demand for electrical and electronic products. That segment, which accounts for more than one-third of our total exports, rose 4.5% y/y in July.

• Despite a positive showing by manufacturing output, the Nikkei Manufacturing Purchasing Managers’ Index (PMI) registered 47.6 in July, slipping from 47.8 in June, indicating that the overall manufacturing sector continued to endure a challenging business environment. It further fell to 47.4 in August 2019 from 47.6 in July, suggesting that manufacturers are facing challenges at the midway point of 3Q2019 – tough demand conditions and rising cost pressures.

• These latest readings broadly indicate that the GDP growth for 2019 will be around 4.5%.

Source: AmInvest Research - 12 Sept 2019