Malaysia - Manufacturing hits 5-month high

Industrial production (IP) grew moderately by 1.3% y/y in December. The poor output from the mining sector, which fell 4.9% y/y, was cushioned by a faster manufacturing output, which rose 3.4% y/y and electricity output at 0.9% y/y.

With 4Q2019 IP averaging at 1.3% y/y compared to 1.5% y/y in 3Q2019, our preliminary estimates suggest the 4Q2019 GDP is likely to hover around 4.3%–4.5%, which translates to a full-year growth of between 4.5% and 4.6%.

• Industrial production (IP) slowed down by 1.3% y/y in December from 2.0% y/y in November. This brings the average 2019 IP growing by 2.4% y/y.

• A drop in mining output by 4.9% y/y from 0.5% y/y in November. Poor mining output was due to a sharp fall in oil production, which was down 6.6% y/y in December from -3.3% y/y in November and natural gas output, which dropped by 3.4% y/y in December from a gain of 3.7% y/y in November.

• Mining output is expected to remain weak in view of: (1) another potential supply disruption following the explosion in the Kebabangan gas field in Sabah; and (2) a potential crude supply cut amid falling demand for crude as China battles the coronavirus epidemic.

• Meanwhile, manufacturing output performed better, up 3.4% y/y from 2.7% y/y in November. The improved output came from electrical & electronics, up 3.1% y/y from 1.1% y/y — a 5-month high. Besides, other manufacturing activities also improved in December like transport equipment & other manufactures (4.7% y/y versus 4.5% y/y in November); nonmetallic mineral products (4.6% y/y from 3.7% y/y in November);and petroleum, chemical, rubber & plastics (3.6% y/y from 2.7% y/y in November).

• In tandem with the improved manufacturing output, manufacturing sales grew by 5.2% from 2.5% in November. Electricity output rose 0.9% y/y from 1.6% y/y in November.

• With 4Q2019 IP averaging at 1.3% y/y compared to 1.5% y/y in 3Q2019, our preliminary estimates suggest the 4Q2019 GDP is likely to hover around 4.3%-4.5%, which translates to a full-year growth of between 4.5% and 4.6%.

Malaysia - Labour market outlook remains challenging

The labour market remained favourable with the unemployment rate closing the year 2019 at 3.3%. However, the outlook for the labour market is challenging in 2020; underpinned by a more moderate economic outlook. The unemployment rate is expected to inch up to 3.4%–3.6%.

• The labour market remained healthy with the unemployment rate in December coming in at 3.3% slightly higher than the 3.2% in November. The slight uptick was due to: (1) a decline in job creation activities, down 29K from 49.4K in November; and (2) a pick-up in unemployed persons at 3.1K from 1.8K in November. But labour force participation rate rose 68.9% in December – the highest since October 2013 from November’s 68.8%. Meanwhile, the outside labour force (housewives, students, retirees and those inactively looking for job), eased to 0.1% y/y in December from 0.3% y/y in November.

• For the full year of 2019, the headline labour market condition remained healthy with unemployment rate at 3.3%, the same as in 2018. Job creation remained steady albeit at slower pace of 300K jobs in 2019 from 346K. Nevertheless, youth unemployment in 2019 rose to 11.7% in 2019 from 11.2% in 2018.

• The outlook of labour market remains challenging in 2020, underpinned by a more moderate economic outlook. The unemployment rate is expected to inch up to 3.4%–3.6%.

Source: AmInvest Research - 10 Feb 2020