In November, industrial production (IP) rose 2.0%y/y surpassing market consensus of 1.0%. It was supported by the turnaround in mining output, up 0.5%y/y from -5.6%y/y in October, added with improved output from both manufacturing (+2.5% y/y) and electricity (+1.6% y/y)

With the average IIP growth for the first two months of 4Q2019 at 1.2% y/y, it implies that the 4Q2019 GDP could be around 4.5%. This should translate the full year GDP growth at 4.5%. For 2020, the GDP is expected to grow around 4.6% supported by private consumption, gross fixed capital formation from the mild expansionary Budget 2020 and complemented by exports.

• In November, industrial production (IP) accelerated by 2.0% y/y from 0.3% y/y in October, beating market consensus of 1.0%. The faster IP print were broad base with manufacturing sector taking the lead, up 2.5% y/y from 2.2% y/y in October, and followed by electricity output (1.6% y/y from 0.5% y/y) and mining output (0.5% y/y from -5.6% y/y).

• Improved manufacturing output was supported by stronger output almost across the board i.e. (1) textiles, wearing apparel, leather & footwear (6.4% y/y from 5.4% y/y); (2) wood, furniture, paper & printing (5.5% y/y from 4.6% y/y); and (3) non-metallic mineral products, basic metal & fabricated metals product (3.7% y/y from 3.1% y/y). In contrast, electrical & electronic (E&E) output was seen slowing down to 1.1% y/y in November from 2.4% y/y in October, reflecting poor E&E shipments orders.

• Besides, manufacturing sales improved slightly by 2.3% y/y in November from 2.2% y/y in October. E&E sales grew 1.6% y/y in November from 2.1% y/y in October while sales from textiles, wearing apparel, leather & footwear rose 7.3% y/y in November from 6.0% y/y; and wood, furniture, paper & printing by 5.4% y/y in November from 3.7% y/y.

• Meanwhile, the mining output reported its first positive growth after four months in contraction. Natural gas output rebounded by expanding by 3.7% y/y in November from -6.3% y/y in October. Meanwhile, the output from crude oil continued to decline. In November it fell by 3.3% y/y compared to -5.1% y/y in October.

• Improved manufacturing output in November fell in tandem with the uptick in November’s Manufacturing Purchasing Managers Index (PMI) which rose to a 14-month high of 49.5 versus 49.3 in October. And with the December manufacturing PMI coming in at 50, it should provide further positive support to the manufacturing sector.

• With the average IIP growth for the first two months of 4Q2019 at 1.2% y/y, it implies that the 4Q2019 GDP could be around 4.5%. This should translate the full year GDP growth at 4.5%. For 2020, the GDP is expected to grow around 4.6% supported by private consumption, gross fixed capital formation from the mild expansionary Budget 2020 and complemented by exports.

Source: AmInvest Research - 13 Jan 2020