Poor industrial production (IP) in March falls in tandem with other recent macro data such as labour, distributive trade and exports, all impacted by the Covid-19 pandemic. The outbreak of the virus has resulted in supply disruptions, a collapse in demand and job losses brought about by containment measures.

March IP fell by 4.9% y/y from 6.2% y/y in February, marking the lowest level since September 2009. The drag in the IP was from across the sub-indices. Manufacturing, mining, and electricity output contracted by 4.2% y/y, 6.5% y/y and 7.0% y/y respectively from +6.2%y/y, +6.1% y/y and +6.8% y/y, respectively in February.

A weak March labour data, reflected by the 3.9% unemployment rate with 112.1K of net job losses, a fall in distributive trade, which was down by 5.7% to bring 1Q2020 to 1.6%, a slow IP growth at 0.6% in 1Q2020, exports for the first quarter at 1.9% and a weaker PMI print in 1Q2020 at 48.6 with March PMI standing at 48.4, are pointing to a slower GDP growth for the quarter. Our estimates suggest that 1Q2020 GDP could hover around -2.8% to -3.5%. However, we feel that the GDP should drop by 3.5%. It will be the first contraction since 2009.

• Poor industrial production (IP) in March falls in tandem with other recent macro data impacted by the pandemic Covid- 19. It resulted in supply disruptions, collapse in demand and job losses brought about by containment measures.

• In March, the IP fell by 4.9% y/y from 6.2% y/y in February, marking the lowest level since September 2009. The drag in the IP was from across the sub-indices. Manufacturing, mining, and electricity output contracted by 4.2% y/y, 6.5% y/y and 7.0% y/y respectively from +6.2%y/y, +6.1% y/y and +6.8% y/y, respectively in February.

• Looking at manufacturing, the sharp drop in out was seen from: (1) E&E, down 5.0% y/y from 7.0% y/y in February – the lowest since April 2011; (2) food, beverages & tobacco, falling by 9.9% y/y from +4.4% y/y in February; and (3) transport equipment and other manufacturers, dropping by 10.2% y/y from 4.9% y/y. However, rubber gloves output jumped by 60.3% y/y from 21.1% y/y in February largely due to strong demand during the virus pandemic.

• In March, mining output was affected by the decline in crude oil and natural gas production. Their respective output slid by 7.1% y/y from -0.5% y/y in February; and to -6.0% y/y from +12.0% y/y in March.

• A weak March labour data, reflected by the 3.9% unemployment rate with 112.1K of net job losses, a fall in distributive trade, which was down by 5.7% to bring 1Q2020 to 1.6%, a slow IP growth at 0.6% in 1Q2020, exports for the first quarter at 1.9% and a weaker PMI print in 1Q2020 at 48.6 with March PMI standing at 48.4, are pointing to a slower GDP growth for the quarter.

• Our estimates suggest that 1Q2020 GDP could hover around -2.8% to -3.5%. However, we feel that the GDP should drop by 3.5%. It will be the first contraction since 2009.

Source: AmInvest Research - 13 May 2020