IPI growth accelerated to +9.4% YoY in Nov (Oct: +5.5% YoY), exceeding the consensus estimate of +7.3% YoY. This was due to a broad-based improvement across all production sectors; manufacturing (+11.3% YoY; Oct: +8.0% YoY), mining (+3.7% YoY; Oct: -3.5% YoY) and electricity production (+5.1% YoY; Oct: +4.1% YoY).

DATA HIGHLIGHTS

IPI growth accelerated to +9.4% YoY in Nov (Oct: +5.5% YoY), exceeding the consensus estimate of +7.3% YoY. Production increased across the board. Manufacturing (+11.3% YoY; Oct: +8.0% YoY) and electricity production (+5.1% YoY; Oct: +4.1% YoY) quickened, while mining production rebounded (+3.7% YoY; Oct: -3.5% YoY) (refer to Figure #1).

On a monthly seasonally adjusted basis, IPI growth picked up (+3.0%; Oct: +1.7%) following the turnaround in mining (+6.8%; Oct: -2.2%) and higher manufacturing growth (+2.9%; Oct: +2.8%), offsetting the decline in electricity production (-0.8%; Oct: +4.2%).

Manufacturing production grew +11.3% YoY (Oct: +8.0% YoY), supported by both domestic and export-oriented sectors. Export-oriented production (+12.6% YoY; Oct: +9.0% YoY) gained momentum, consistent with strong exports growth during the month (+32.4% YoY; Oct: +25.5% YoY). The sector was driven by E&E (+17.8% YoY; Oct: +13.6% YoY), ‘wood products, furniture, paper products, printing’ (+9.4% YoY; Oct: +1.4% YoY), ‘petroleum, chemical, rubber & plastic products’ (+8.5% YoY; Oct: +6.3% YoY) and ‘textiles, wearing apparel, leather products & footwear’ (+6.0% YoY; Oct: +3.1% YoY). The strong E&E showing was also in line with the increase in the Empire State Future Technology Spending index (Nov: 28.0; Oct: 26.9).

Meanwhile, the domestic-oriented sector also picked up pace (+8.6% YoY; Oct: +5.9% YoY) on the back of higher ‘food, beverages & tobacco’ (+12.9% YoY; Oct: +9.3% YoY), ‘non-metallic mineral products, basic & fabricated metal products’ (+7.6% YoY; Oct: +3.5% YoY) and ‘transport equipment & other manufactures’ (+4.5% YoY; Oct: +4.4% YoY).

Mining production rebounded in Nov (+3.7% YoY; Oct: -3.5% YoY) owing to higher natural gas production (+10.2% YoY; Oct: +2.0% YoY), while crude petroleum production declined at a slower pace (-4.4% YoY; Oct: -10.2% YoY). However, on a MoM basis, crude petroleum improved (+4.5%; Oct: +3.0%) while natural gas moderated (+8.4%; Oct: +10.2%). Crude petroleum production could increase further in the coming months following the OPEC+ agreement to raise oil output by 400,000 bpd from Feb 2021.

HLIB’s VIEW

Global manufacturing PMI remained expansionary (Dec: 54.2; Nov: 54.2), with higher rates of output and new orders. Despite some drag from price and supply chain pressures, there are tentative signs that these are starting to ease. The New York Fed’s gauge for global supply chain pressures fell to 4.37 standard deviations above normal in Nov, coming off the peak of 4.43 in Oct. In line with this, IHS Markit has also reported a smaller number of global companies whose output was affected by raw material or staff shortages. While supply chain pressures remain prominent, robust external demand is still anticipated to support manufacturing activity in Malaysia. We maintain 2022 GDP forecast at +5.5% YoY.

Source: Hong Leong Investment Bank Research - 11 Jan 2022