• IPI tumbled by 22.1% yoy in May

• All three sub-indices declined drastically

• Manufacturing sales declined at slower pace

• Productivity decreased 17.5% yoy

• Global semiconductor sales increased 5.8% yoy in May

• Annual global semiconductor sales projected to increase 3.3% in 2020, 6.2% in 2021

• Global industrial production plunged in April

• A bumpy road ahead as continued fall in IPI reflected weak external demand

IPI tumbled 22.1% yoy in May

The pace of decline in Malaysia's industrial production index (IPI) slowed to 22.1% yoy in May, after a 32.0% yoy plunged a month earlier. This was the second-steepest decline on record, due to the effect of movement control orders (MCO) to prevent the Covid-19 outbreak. Deterioration of IPI in May was due to the significant decline in all indices which recorded a double-digit drop. On the other hand, the IPI in May surged 18.2% compared with the previous month since the government allowed more industries to resume operations in May. Based on month-on-month comparison, the increment of IPI in May was due to the increase in all indices; index of manufacturing (25.9%), index of electricity (13.7%) and index of mining (0.4%). In a seasonally adjusted terms, IPI in May recorded a positive growth of 14.6% due to the sharp increase in manufacturing index (22.1%) and electricity index (11.3%). Meanwhile, the mining index is still at a negative level which is -3.9%. The IPI in the period of January to May 2020 dropped 10.6% as compared to the same period of the previous year. The decrease was contributed by the decline in all sectors; manufacturing, mining and electricity which decreased 11.4%, 9.5% and 6.3% respectively.

All three sub-indices declined drastically

Malaysia IPI slumped by another 22.1% yoy in May, on top of the 32% yoy fall reported in the previous month, due to the significant decline in all indices. The manufacturing sector output contracted 23.2% yoy basis after recorded 37.2% decline in April. The recovery in manufacturing output was supported by improvement in production of electrical & electronics (E&E) products (May: -11.2%; Apr: -34.1%; Mar: -5.0%; Feb: 5.1%; Jan: 3.2%), non-metallic mineral products, basic metal and fabricated metal products (May: - 45.1%; Apr: -62.7%; Mar: -9.8%; Feb: 6.2%; Jan: 3.9%) and transport equipment and other manufactures (May: -38.5%; Apr: -69.3%). The mining sector output dropped 22.2% yoy. The deterioration was due to the decrease in crude oil and condensate index (May: -22.2%; Apr: -20.2%; Mar: -7.1%; Feb: -0.5%; Jan: +5.9%) and natural gas index (May: -22.2%; Apr: -19.0%; Mar: -6.0%; Feb: +12.0%; Jan: -2.3%). The electricity sector output decreased 10.3% in May.

Manufacturing sales declined at slower pace

Manufacturing sales declined further albeit at a slower pace of -19.8% yoy (Apr: -33%) to RM90.2bn. On month-on-month growth, the sales value went up by 19.1% (RM14.5bn) while in a seasonally adjusted terms, the sales value registered an increase of 19.3%. With the exception of petroleum, chemical & rubber products (May: -11.4%; Apr: -9.8%), all other products reported improved sales during the month. Among the products which registered better sales includes non-metallic mineral products, basic metal & fabricated metal products (May: -46.8%; Apr: -67.5%), transport equipment & other manufactures products (May: -29.9%; Apr: --69.5%) and electrical & electronics products (May: -19.9%; Apr: -39.6%).

Source: BIMB Securities Research - 10 Jul 2020