Industrial Production (IP) continued to grow but at a slower pace in August by 0.3% y/y from 1.3% y/y in July. IP was largely supported by manufacturing compensating for the poor production from mining and electricity. Besides, positive news is seen from the distributive trade that fell at a slower pace by 2.3% y/y in August from -3.5% y/y in July suggesting gradual pick up in demand and confidence

Preliminary forecast based on current set of incoming data suggest the 3Q2020 GDP growth is likely to present a smaller contraction of between -3.5% to -4.5% compared to -17.1% y/y in 2Q2020. And factoring in for a second wave of the virus pandemic plus the stimulus measures introduced, the full year GDP is expected to hover between -3.6% and -5.5%. Much of the downside risk depends on external challenges besides domestic noises.

• Industrial Production (IP) continued to grow but at a slower pace in August by 0.3% y/y from 1.3% y/y in July. IP was largely supported by manufacturing which grew by 2.4% y/y (2.9% in July) compensating for the poor production from mining (-6.7% y/y) and electricity (-1.2% y/y)

• On m/m, IP fell for the first time since April this year by 1.2%. Drag came primarily from mining (-6.9%) and electricity (- 1.2%), more than offset the gain from manufacturing (+2.4%).

• Manufacturing continued to be supported by exports and domestic activities. The electrical and electronics products (6.9%) is seen benefitting from the pick up in global semiconductor sales. At the same time, manufacturing is supported by domestic activities such as transport equipment and other manufacturers (6.9%), food, beverages and tobacco (4.7%), basic metal (+3.2% y/y), and rubber & plastic products (+32.5% y/y).

• Meanwhile, the poor mining data was due to continued decline in oil production since December 2018 (-5% in August). Likewise national gas output fell to -8% in August for the fifth consecutive months.

• Positive news is seen from the distributive trade that fell at a slower pace by 2.3% y/y in August from -3.5% y/y in July suggesting gradual pick up in demand and confidence. This is reflected by the strong outstanding household loans which grew faster by 4.8% y/y in August from 4.3% y/y in July – marking the fastest since June 2019.

• Details from distributive trade shows slower decline from wholesale (-3.9% y/y in August vs. -4.5% y/y in July); retail sales (-1.5% y/y in August vs -3.8% y/y in July) and motor vehicle sales (1.0% y/y in August vs 1.7% y/y in July).

• Preliminary forecast based on current set of incoming data suggest the 3Q2020 GDP growth is likely to present a smaller contraction of between -3.5% to -4.5% compared to -17.1% y/y in 2Q2020. And factoring in for a second wave of the virus pandemic plus the stimulus measures introduced, the full year GDP is expected to hover between -3.6% and -5.5%. Much of the downside risk depends on external challenges besides domestic noises.

Source: AmInvest Research - 13 Oct 2020