• IPI picks up in July, rising 2.6% yoy; 2.2% mom

• Production supported by higher output in manufacturing and electricity sector

• Manufacturing sales increased to 6-month high

• Productivity rose by 7.5% yoy

• Firmer global semiconductor sales in July

• Global industrial production remains stable despite rising trade tension

• IPI to expand at steady pace amid escalating trade tension

Industrial output growth improves

Malaysia’s industrial production index (IPI) for the month of July increased by 2.6% yoy, after a near 4-year low of 1.1% recorded in the prior month. The stronger IPI growth was primarily driven by manufacturing sector output which accelerated by 5.2% yoy from 4.6% in June, as well as electricity output which rose by 4.5% yoy (+3.0% in June. In addition, mining output fell at a softer 5.9% yoy as compared to - 9.4% in a month earlier.

On monthly basis, the IPI was up by 2.2% in July after declining by 0.5% in the preceding month. The increase in July was due to the increase in all indices: manufacturing (Jul: 1.8%; Jun: 1.5%), mining (Jul: +1.9%; Jun: -5.4%) and electricity (Jul: +6.8%; Jun: -4.3%).

Cumulatively, total IPI grew by 3.2% in the first seven months of 2018 from 4.3% in the same period last year. This was led by slower growth in the manufacturing sector of 5.0%, against 6.3% in the same corresponding period last year. Meanwhile, mining sector declined by 2.0% (7M2017: -0.6%) largely due to contraction in natural gas output. However, electricity index jumped to 3.9% from 1.9% between January and July this year. All in all, IPI suggests that production activities shifting into lower gear.

Source: BIMB Securities Research - 12 Sept 2018