KUALA LUMPUR (March 12): Economists are expecting Malaysia’s industrial production index (IPI) to accelerate in 2024 on the back of a positive trade outlook.

January's factory output rebounded at a faster-than-expected rate, led by a surge in manufacturing activities of 3.7%.

In a note on Tuesday, MIDF Research anticipates that IPI growth will continue to rise, supported by the stabilisation in overall manufacturing activities with a still encouraging sentiment among local manufacturers on the demand outlook.

It added that the manufacturing sales will improve in line with the recovery in export-oriented sectors, on top of continued growth in domestic demand.

"Sales of electrical and electronics (E&E) components, chemicals and chemical products and refined petroleum are among manufactured products, which will benefit from improvement in external demand,” MIDF Research said.

Following the moderate IPI growth of 1.1% in 2023, the research house maintained its projection that Malaysia’s IPI will grow stronger at 3.7% this year, benefiting from the recovery in the external demand and pick-up in global manufacturing activities.

Earlier on Tuesday, the Department of Statistics Malaysia’s (DOSM) data show that the country’s IPI increased 4.3% in January compared to the previous year, marking the fastest growth since May 2023.

Manufacturing activities rose 3.7% in January this year after contracting 1.4% in December 2023, while mining output growth accelerated to 5% from 4.1% during the same period. Electricity output also surged 8.3% in January 2024 versus a 4.1% gain in December 2023.

Chief Statistician Datuk Seri Dr Mohd Uzir Mahidin attributed the January turnaround in manufacturing activities to strong performance in domestic-oriented industries, with the export-oriented industries having returned to positive territory.

RHB Research also remains bullish on the prospect of export-oriented industries including E&E, petroleum and petroleum-based products, as well as metal goods production amid stronger external demand.

The research house noted that the export activity has started to gain momentum amid higher outbound shipments of E&E and commodity-based products.

“The resiliency in capital and intermediate goods imports coupled with recent pick-up of manufacturing sentiment index suggests that there is an improvement in investment appetite as well,” it said.