Malaysia’s industrial production index (IPI) grew by 3.0% yoy in January, slightly higher than 2.9% rise in the previous month. Sub sectors such as mining and electricity were the main drivers, growing by 1.5% and 4.3% respectively in January from -4.1% and 3.9% in the previous month. However, growth in manufacturing took a breather at 4.8% from 5.3% previously.
On monthly basis, the IPI declined 4.5% from 2.2% increase in December. The significant deceleration was prompted by slower manufacturing (Jan 2018: -5.8%; Dec 2017:2.2%) and electricity (Jan 2018: - 1.6%; Dec 2017: 1.7%) production. Mining production was stable in January, increased by 2.4% for two consecutive months.
The moderate pace of IPI growth was mainly driven by the manufacturing sector, which accounted for 66% in the IPI weights. However, the production growth of manufacturing sector continued its downward trend for three consecutive months (Jan 2018: 4.8%; Dec 2017: 5.3%; Nov: 6.7%). The growth in manufacturing output in January was led by moderation in petroleum, chemical, rubber & plastic products (Jan’18: 2.1%; Dec’17: 3.5%) and electrical & electronics (Jan’18: 4.0%; Dec’17: 4.2%). Both sub-indices accounted for 42% of total IPI constituent.
The mining sector output rallied to 1.5% yoy following a significant drop of -4.1% in December. The recovery was contributed by the increase in major subsectors; crude oil index (Jan’18: 1.8%; Dec’17: - 5.0%) and the natural gas index (Jan’18: 1.5%; Dec’17: -3.2%)
Electricity output rose by 4.3% yoy in January 2018, following an increase of 3.9% yoy in the preceding month.
Manufacturing sales in January posted double-digit growth of 10.8% yoy and after logging a slower pace of growth in December at 9.4%. The manufacturing sector recorded a sales value of RM67.8bn in January 2018, with an increase of RM6.6bn as compared to RM61.2bn reported a year ago. The increase was supported by the E&E products (Jan’18: 14.3%; Dec’17: 9.3%), petroleum, chemical, rubber and plastic products (Jan’18: 10.9%; Dec’17: 12.5%), and non-metallic mineral products, basic metal and fabricated metal products (Jan’18: 8.1%; Dec’17: 6.8%). These three sub-sectors accounted 80.2% to the total sales value of the manufacturing sector.
On monthly basis, the sales value increased by 0.7% (RM0.5bn) as compared with the preceding month. On a seasonally adjusted mom, the sales value in January 2018 rebounded to 1.3% (Dec: - 0.1%).
Manufacturers added more workers during the month as reflected in the hiring of workers where total employees engaged in the manufacturing sector in January 2018 was 1,070,549 persons, an increase of 2.5% or 26,203 persons as compared to 1,044,346 persons in January 2017. On monthly basis, the number of employees increased by 1.2% as compared to 1,057,591 persons in the preceding month.
Salaries & wages paid in January 2018 surged 13.3% yoy (RM439.7m). When compared to the previous month, the total amount paid in January 2018 dropped by 0.9% (RM34.0m) to register RM3.7bn. The average salaries & wages paid per employee registered RM3,494 in January 2018, a rise of 10.5% yoy and a decrease of 2.1% mom.
Productivity or average sales value per employee in January 2018 up by 8.0% yoy and declined by 0.5% mom to register RM63,292.
According to data from the Semiconductor Industry Association (SIA), global sales of semiconductor products for the month of January 2018 contracted slightly by -1.0% mom to USD37.6bn after peaking at USD38.0bn in December 2017. This is in tandem with the normal seasonal market trends. Nonetheless, it is still 22.7% yoy higher as compared to January 2017 sales of USD30.6bn. This represents the 18th consecutive month of yoy increase starting from August 2016. For January, the slight decline in sales mom was mainly attributable to lower sales from the Americas (-3.6%), Japan (- 1.0%) and Asia Pacific/all other regions (-0.6%). Meanwhile, on yoy basis, all markets continue to post double-digit growth. We expect sales growth rate to taper off steadily towards the end of year mainly due to high base effect.
Industrial production in the US grew by 3.7% yoy in January, slightly higher than an increase of 3.4% in the previous month. Utilities recorded the highest gain, followed by mining and manufacturing; 10.8%, 8.8% and 1.8% respectively. In contrast, Japan’s industrial production slowed to 2.7% yoy in January 2018 from 4.4% posted in December 2017.
Although Eurozone’s data is yet to be released, among countries for which data is already available showed weakness in industrial production across the Eurozone in January. The 0.1% monthly decline in German industrial production followed an upwardly-revised 0.5% fall the previous month. Industrial production was even weaker in France and Spain. In France, January’s 2.0% monthly drop was far below the consensus expectation of a 0.2% decline, while the 2.6% decline in output in Spain was far weaker than the consensus forecast for an unchanged reading. January’s production data seem to paint a pretty bleak picture of the Eurozone economy at the start of 2018 but temporary factors, unseasonably warm weather, weighed on energy production appear to be behind much of the weakness.
Regionally, there were mixed industrial production growth in January 2018. Singapore’s industrial production surged 17.9% after a downwardly revised 3.4% fall in December 2017. It was the highest increase in factory production since August 2017, as there was an improvement of output for biomedical manufacturing and transport engineering. Likewise, industrial production in Philippines picked up to 20.4% yoy (Dec: -9.8%) after posting four consecutive months of negative growth. The significant increase was supported by the rally output for chemical products and faster pace of increase for machinery product. However, Thailand’s industrial production grew at a slower pace of 3.4% yoy in January 2018 from 4.9% in the preceding month. It marked the third straight month of increase in industrial production, as output continued to grow for petroleum, rubbers and cars.
Despite 3.0% yoy growth in the first month of 2018, we remain optimistic on the IPI performance this year. The encouraging trend of IPI growth experienced in 2017 is expected to continue for 2018 given a robust external trade performance, with manufacturing output remaining resilient.
Meanwhile, the worldwide sales of semiconductor do not display signs of cooling, although the growth rate may trend lower mainly due to the high base effect. Moving forward, the annual growth rate is expected to taper off to single-digit in 2018 according to World Semiconductor Trade Statistic (WSTS). Nonetheless, we expect demand for semiconductor products to remain robust.
Export growth rebounded to 17.9% yoy in January from 4.7% in December mainly due to higher growth of manufactured shipments (20.4%) supported by stronger export growth of electrical and electronics (Jan’18: 27.1%; Dec’17: 4.7%). The strong trade numbers in January were partly driven by a sustained global demand.
We expect the positive manufacturing momentum in terms of production and sales to continue in 2018, supported by stronger global growth and export growth, added by improving domestic sentiment coming from both the business and consumer segments. This is reflected by the steady growth in the imports of intermediate and capital goods. We view IPI performance to continue expanding at steady pace in line with continued exports growth. We forecast IPI growth of 4.2% in 2018. Downside risks include further trade protectionist measures led by US, more aggressive monetary policy normalization from global central banks and geopolitical risks
Source: BIMB Securities Research - 14 Mar 2018
Created by kltrader | Aug 19, 2024
Created by kltrader | Aug 12, 2024
Created by kltrader | Aug 12, 2024