IPI growth moderated to +4.6% YoY in Oct (Sep: +10.8% YoY), missing consensus expectations of +7.7% YoY. Growth was weighed down by softer mining (+8.6% YoY; Sep: +15.0% YoY) and manufacturing (+4.2% YoY; Sep: +10.4% YoY) production, coupled with a contraction in electricity production (- 1.9% YoY; Sep: +4.1% YoY).

DATA HIGHLIGHTS

IPI growth moderated to +4.6% YoY in Oct (Sep: +10.8% YoY), missing consensus expectations of +7.7% YoY. Growth was weighed down by softer mining (+8.6% YoY; Sep: +15.0% YoY) and manufacturing (+4.2% YoY; Sep: +10.4% YoY) production, coupled with a contraction in electricity production (-1.9% YoY; Sep: +4.1% YoY) (refer to Figure #1).  

On a monthly seasonally adjusted basis, IPI recorded a decline (-3.7%; Sep: +0.7%), following a downturn in mining production (-6.0%; Sep: +6.3%), as well as continued decline in both manufacturing (-3.1%; Sep: -0.5%) and electricity (-1.0%; Sep: -1.1%) production.  

The manufacturing index slowed pace (+4.2% YoY; Sep: +10.4% YoY), on the back of slower growth in both the domestic-oriented and export-oriented sectors. The moderation in export-oriented sector growth (+5.4% YoY; Sep: +11.0% YoY) was consistent with the slower exports momentum during the month (+15.0% YoY; Sep: +30.1% YoY). Within the sector, slower production was seen for ‘wood products, furniture, paper products & printing’ (+0.3% YoY; Sep: +8.7% YoY), as well as for ‘petroleum, chemical, rubber & plastic products’ (+3.2% YoY; Sep: +6.5% YoY). Similarly, E&E production eased as well (+8.7% YoY; Sep: +15.5% YoY), in line with the decline in Empire State Future Technology Spending Index (11.0; Sep: 13.2). Meanwhile, ‘textiles, wearing apparel, leather products & footwear’ (-1.8% YoY; Sep: +8.0% YoY) contracted, mainly due to a dip in manufacture of wearing apparel.  

Growth in the domestic-oriented sector also moderated further (+1.7% YoY; Sep: +9.2% YoY), following a contraction in ‘transport equipment & other manufactures’ (-0.4% YoY; Sep: +21.6% YoY) which saw a dip in motor vehicle production (-5.7% YoY; Sep: +35.6% YoY). The softer production for ‘non-metallic mineral products, basic & fabricated metal products’ (+3.0% YoY; Sep: +6.4% YoY), as well as for ‘food, beverages & tobacco’ (+1.7% YoY; Sep: +5.0% YoY) also contributed to the slower growth.  

Meanwhile, mining production eased further (+8.6% YoY; Sep: +15.0% YoY), on the back of slower crude petroleum (+4.8% YoY; Sep: +7.2% YoY) and natural gas production (+11.4% YoY; Sep: +21.0% YoY). On a monthly basis, natural gas production slowed pace (+1.5%; Sep: +7.7%), while crude petroleum rebounded (+2.2%; Sep: -1.4%).

HLIB’s VIEW

On the global front, global manufacturing PMI slipped further into contraction territory at 48.8 in Nov (Oct: 49.4). The steeper decline was mainly due to weaker intakes of new business, deteriorating international trade flows and ebbing business optimism about the future. In line with the bleaker global outlook, Malaysia’s industrial production is also expected to continue moderating moving into next year, clouded by the impact of rising uncertainties and cost pressures.

Source: Hong Leong Investment Bank Research - 13 Dec 2022