Industrial production (IP) in April grew faster than expected, up 4.6% y/y, beating consensus of 3.7% and ours of 4.2%, supported by broad-based growth from all the three sub-indices i.e. manufacturing (5.3% y/y), electricity (5.8% y/y) and mining (1.8% y/y). The strong manufacturing output was supported by the E&E and manufacturing sales.

We expect the economy to maintain a credible growth in 2018. We reiterate our 2018 GDP projection of 5.5% and 5.3% for 2019, supported by domestic activities and exports. With manufacturing wages continuing to grow strongly by 10.2% y/y in April, added with the removal of the GST that will be replaced with the SST, moderate inflation of 2.0%–2.5%, the USD/MYR to stabilize around 3.90–93, and steady OPR at 3.25%, these should underpin private spending and business activities.

• IP in April grew much faster than expected, up 4.6% y/y following a 3.1% y/y gain in March, beating consensus estimates of 3.7% and ours of 4.2%. It was supported by broad-based growth from all the three sub-indices. Manufacturing output rose 5.3% y/y in April from 4.1%y/y in March, while supply of electricity and mining output both gained by 5.8% y/y and 1.8% y/y respectively.

• The strong manufacturing output was supported by the robust April exports which expanded 14% y/y, suggesting the export-oriented manufacturing activities are performing well, mainly coming from the electrical and electronics segment. Besides, we found the overall manufacturing sales are also robust. Manufacturing sales jumped by 2.1 times in April to register a sales growth of 8.2% y/y compared to 3.9% y/y in March.

• We expect the economy to maintain a credible growth in 2018. We reiterate our 2018 GDP projection of 5.5% and 5.3% for 2019, supported by domestic activities and exports. With manufacturing wages continuing to grow strongly by 10.2% y/y in April, added with the removal of the GST that will be replaced with the SST, moderate inflation of 2.0%–2.5%, the USD/MYR to stabilize around 3.90–93, and steady OPR outlook of 3.25%, these should underpin private spending and business activities.

Source: AmInvest Research - 12 Jun 2018