• Malaysia's IPI Surged by 6.1% in April
   
• Manufacturing Sectors Sales Value Up by 5.7%
   
• Manufacturing sector employment grew by 1.0%

• On track for manufacturing recovery in 2H24

Malaysia's Industrial Production Index (IPI) surged by 6.1% in April 2024, marking the fourth consecutive month of growth. Additionally, IPI achieved its highest growth since September 2022, driven by expansion across all sectors during the month. Manufacturing sector output increased by 4.9% (Mar: 1.3%), while the Mining sector showed a robust growth of 10.0% (Mar: 4.9%). Meanwhile, the Electricity sector maintained a steady growth at 7.6% (Mar: 8.5%). However, compared to the previous month, the IPI declined by 7.6%, contrasting with the growth recorded in March.

The increase in Manufacturing output in April 2024 was driven by a 2.6% rise in export-oriented industries (Mar: 0.5%). This growth was mainly led by the Manufacture of coke and refined petroleum products and the Manufacture of chemicals and chemical products, which saw increases of 5.9% and 5.0%, respectively. Additionally, the Manufacture of furniture surged by 13.1% during the month. This YoY expansion mirrored the performance of the country's manufactured goods exports, which grew by 7.1% in April (Mar: 0.6%). However, on a MoM basis, export-oriented industries declined by 11.6%, following an 11.0% growth in March 2024.

On the other hand, domestic-oriented industries maintained their growth, registering a 9.5% increase. This growth was primarily driven by a significant 20.2% rise in the Manufacture of motor vehicles, trailers, and semi-trailers; a 12.8% increase in the Manufacture of fabricated metal products (excluding machinery and equipment); and an 11.2% growth in the Manufacture of other non-metallic mineral products. However, compared to the previous month, domestic-oriented industries experienced a 1.3% decline, following a 1.9% increase in March 2024.

Output growth in the Mining sector accelerated to 10.0% in April 2024 (Mar: 4.9%), propelled by a double-digit growth of 14.9%, Natural Gas production led the way (Mar: 8.9%). Additionally, Crude Oil & Condensate output resurged by 3.5% in April 2024 (Mar: - 0.7%). Compared to March 2024, the Mining index declined by 6.3% following a 5.3% growth in the previous month.

Electricity output grew by 7.6% in April 2024 (Mar: 8.5%). Compared to the previous month, the Electricity index decreased by 4.1%, which is a shift from the positive 11.2% recorded in March 2024.

The Manufacturing sector's sales value increased by 5.7% to RM153.2bn, marking the highest growth in 13 months, attributed to a lower value base effect in April (Mar: 1.4%). The surge was primarily driven by sales in sub-sectors such as Transport equipment & other manufactures (16.9%); Non-metallic mineral products, basic metal & fabricated metal products (12.8%); and Electrical & electronics products (2.7%). Yet, the sales value of the Manufacturing sector contracted by 3.3%, down from RM158.4bn in the previous month.

The sales value of export-oriented industries contributing 69.9% of total sales, saw an upward trend with a 3.4% increase in April 2024 (Mar: -0.1%). The increase was driven by growth in the Manufacture of chemicals & chemical products (9.9%); Manufacture of vegetable & animal oils & fats (8.3%); and Manufacture of computer, electronics & optical products (2.9%) industries. However, compared to the previous month, the sales value of export-oriented industries decreased by 3.9%, contrasting with the double-digit growth of 10.0% recorded in March 2024.

In the meantime, the sales value of domestic-oriented industries continued to be strong, accelerating by 11.4% in April 2024 (Mar: 5.4%). The acceleration was driven by the Manufacture of motor vehicles, trailers & semi-trailers, and the Manufacture of fabricated metal products (excluding machinery & equipment), which surged by 23.1% and 17.0%, respectively. Compared to the previous month, the sales value of domestic-oriented industries decreased by 1.9%, contrasting with the positive 4.7% recorded in March 2024.

Stable employment levels in the manufacturing sector. The Manufacturing sector employed 2.37mn workers in April, marking a 1.0% increase compared to the 2.35mn persons employed in April 2023 (Mar: 0.5%). The rise was mainly observed in the Food, beverages & tobacco (4.7%); Non-metallic mineral products, basic metal & fabricated metal products (2.3%); and Wood, furniture, paper products & printing (1.3%) sub-sectors. On monthly basis, there was a slight increase of 0.4% in the number of employees in this sector.

Outlook

Looking ahead, we expect domestic sector growth to persist despite external challenges in 1H24. Recent data shows the IPI for several countries climbed in April 2024, including China, South Korea, Vietnam, and Thailand, with strong growth seen in Taiwan. Japan and Singapore continued to decline in April 2024, albeit at a slower rate, while the United States experienced a slight drop. Malaysia's industrial output recorded its highest growth since September 2022, steered by expansion across all sectors during the month and is anticipated to remain robust in 2H24. Our 2024 IPI forecast is maintained at 5.3%.

Manufacturing sales ascended by 5.7% to RM153.2bn in April 2024, marking the highest growth in 13 months due to a lower value base effect (Mar: 1.4%). This mirrors the expansion in the latest PMI (May: 50.2; Apr: 49.0) suggesting a promising start to a broader recovery in the second half of 2024. China's robust factory activity in May (May: 51.7; Apr: 51.4) is expected to have a positive spillover effect on Malaysia in the coming quarters. Also, the recent uptick in sales of electronics and electrical (E&E) products (April: 2.7%; March: 2.4%), coupled with the RM25bn in fiscal support to drive the National Semiconductor Strategy (NSS), supports our optimistic view of the recovery in the electronics and semiconductor sectors in the latter part of 2024. Despite global challenges, a Malaysia manufacturing recovery is expected to continue in 2024.

Source: BIMB Securities Research - 11 Jun 2024