IPI growth accelerated to +9.3% YoY in Mar (Feb: +1.5% YoY), faring better than the consensus estimate of +8.7% YoY. Growth was driven by surge in manufacturing (+12.7% YoY; Feb: +4.5% YoY) and electricity production (+10.3% YoY; Feb: -5.8% YoY), while the decline in mining production eased (-1.9% YoY; Feb: -6.0% YoY). In 1Q21, IPI rebounded by +3.9% YoY (4Q20: -0.4% YoY). We maintain 2021 GDP at +5.0%.

DATA HIGHLIGHTS

IPI growth accelerated to +9.3% YoY in Mar (Feb: +1.5% YoY), faring better than the consensus estimate of +8.7% YoY. Growth was driven by surge in manufacturing (+12.7% YoY; Feb: +4.5% YoY) and electricity production (+10.3% YoY; Feb: -5.8% YoY), while the decline in mining production eased (-1.9% YoY; Feb: -6.0% YoY) (refer to Figure #1).

However, on a monthly seasonally adjusted basis, IPI growth declined by -2.2% (Feb: +6.3%) following the decline in mining (-4.6%; Feb: +4.1%), manufacturing (-1.8%; Feb: +6.7%) and moderation in electricity production (+3.2%; Feb: +4.2%).

Growth in manufacturing production jumped to +12.7% YoY (Feb: +4.5% YoY), supported by stronger performance in export and domestic-oriented sectors. Export oriented sector growth (+13.5% YoY; Feb: +8.2% YoY) was attributed to higher production across all industries, which includes ‘petroleum, chemical, rubber & plastic products’ (+14.1% YoY; Feb: +8.9% YoY), ‘electrical & electronics products’ (+13.8% YoY; Feb: +10.3% YoY), ‘wood products, furniture, paper products, printing’ (+11.1% YoY; Feb: +0.9% YoY) and ‘textiles, wearing apparel, leather products & footwear’ (+9.1% YoY; Feb: -1.0% YoY).

The domestic-oriented sector recorded a turnaround of +11.0% YoY (Feb: -2.9% YoY), driven by the surge in ‘transport equipment & other manufactures’ (+20.9% YoY; Feb: +3.2% YoY), primarily in manufacture of motor vehicles, trailers and semi-trailers category (+33.5% YoY; Feb: +7.3% YoY). Recovery was also seen in ‘non-metallic mineral products, basic & fabricated metal products’ (+8.0% YoY; Feb: -2.7% YoY) and ‘food, beverages & tobacco’ (+7.2% YoY; Feb: -7.4% YoY).

Mining production declined for the 13th consecutive month, albeit at a slower pace (- 1.9% YoY; Feb: -6.0% YoY). The decline was cushioned by improvement in natural gas production (+4.3% YoY; Feb: -1.6% YoY), while the fall in crude petroleum production eased (-9.4% YoY; Feb: -11.5% YoY). Meanwhile, on a monthly basis, production recovered for both natural gas (+6.2%; Feb: -7.1%) and crude petroleum (+8.1%; Feb: - 11.4%).

In 1Q21, IPI rebounded by +3.9% YoY (4Q20: -0.4% YoY) following better performance in manufacturing production (+6.8% YoY; 4Q20: +2.8% YoY), which offset the decline in mining (-4.1% YoY; 4Q20: -11.1% YoY) and electricity production (-0.1% YoY; 4Q20: -0.6% YoY).

HLIB’s VIEW

The upswing in global manufacturing sector strengthened in Apr (manufacturing PMI: 55.8; Mar: 55.0) as output rose at the fastest pace in over a decade. The outlook for the sector also strengthened, with optimism about future output levels remaining among the best signalled in the series history. Domestically, stronger manufacturing production recorded for 1Q21 is expected to contribute positively to 1Q21 GDP (to be released on 11th May 2021). We maintain 2021 GDP at +5.0%.

Source: Hong Leong Investment Bank Research - 7 May 2021