As expected, both the industrial production and distribute trade collapsed in July, primarily inflicted by the lockdown.

The poor showing is expected to weigh on the 3Q GDP. Based on our monthly projection, July’s GDP should be around -8.4% with +/- 2.5-percentage point deviation. For the full year, the GDP is forecasted to be around 3.0%–3.5%.

A. Highlights

• In July, the industrial production (IP) declined by 5.2% y/y in July compared to 1.4% y/y in June – the weakest since May 2020 – reflecting the impact from the extended pandemic induced lockdown measures.

• A breakdown of the data showed steeper contraction in the manufacturing and electricity output at -6.5% y/y and -6.7% y/y, respectively in July (June: -0.2% and -4.8% y/y). The downside was cushioned by a marginal positive mining output growth, at +0.7% y/y (June: +10.3%).

• Export-oriented industries remained healthy, reporting a positive growth of 1.9% y/y in July (June: 8.4%), while domestic-oriented activities plunged by 24.7% y/y (June: -23.0%). The export-oriented sector was supported by coke & refined petroleum products, rubber products, and chemicals & chemical products. Meanwhile, domestic industries were weak as they were dragged by the lockdown.

• In July, the mining output grew by 0.7% y/y supported by natural gas although crude oil output fell by 3.6% y/y (June: +6.3%).

• The impact from the lockdown saw distributive trade dropping by 14.7% y/y in July (June: -10.4%), marking the weakest since May 2020.

• Poor showing was seen across the board i.e. retail segment (-8.1% y/y), motor vehicles (-85.4% y/y) and wholesale trade (-1.1% y/y). Meanwhile, e-commerce activities remained resilient, up 17.9% y/y in July (June: 17.0%).

B. Key Takeaways

• The poor July data is expected due to the impact from the lockdown. It is also expected to weigh on the 3Q GDP. Based on our monthly projection, July’s GDP should be around -8.4% with +/- 2.5-percentage point deviation. For the full year, the GDP is forecasted to be around 3.0%–3.5%.

Source: AmInvest Research - 13 Sept 2021