June’s industrial production (IP) grew for the second consecutive month, benefitting from improved output from all the sub-sectors. In particular, the manufacturing sector reported strong growth both monthly and annual due to improved demand and E&E with the relaxation of lockdowns and the movement control order (MCO).

With the average IP for 2Q2020 at -18.0% y/y in 2Q2020 from 0.6% y/y in 1Q2020, the economy is likely to register a negative GDP growth of around -10% to -11% for the quarter from +0.7% in 1Q2020.

Meanwhile, unemployment data improved to 4.9%. Still, the labour market remains challenging. Uncertainties remain after the wage subsidy programme ends. Added with the risk of the second wave of the virus, plus ongoing challenges i.e. trade and politics, the downside risk on growth remains. The full-year GDP for 2020 should grow around -2% with the downside at -5%.

• June’s industrial production (IP) grew for the second consecutive month, benefitting from improved output from all the sub-sectors. The relaxation of lockdowns and the MCO benefitted manufacturing from the pick-up in demand besides a positive contribution from the E&E segment.
• IP rose 22.6% m/m after growing by 18.9% m/m in May. All the sub sectors rose in June. On an annual basis, the IP fell at a smaller pace by -0.4% from -21.6% in May. The smaller contraction was due to stronger manufacturing which compensated the decline in mining and manufacturing.
• Meanwhile, the labour market improved in June, with the unemployment rate easing to 4.9%, after hitting a threedecade high in May at 5.3%. The number of those unemployed stood at 773.2K from 826.1K in May or a decrease of around 52.9K.
• A total of 102.3K jobs were created in June, bringing the number of employed persons to 15.0 million, versus 14.9 million in May. The job creation was concentrated in services sector such as e-commerce, delivery services and ICTrelated activities. Another key point to note is that the number of employed persons who were temporarily not working fell from 2.27 million in May to 0.77 million in June.
• With the average IP for 2Q2020 at -18.0% y/y in 2Q2020 from 0.6% y/y in 1Q2020, the economy is likely to register a negative GDP growth of around -10% to -11% for the quarter from +0.7% in 1Q2020.

Source: AmInvest Research - 10 Aug 2020