IPI growth picked up to +4.8% YoY in Nov (Oct: +4.6% YoY), surpassing consensus expectations of +2.9% YoY. Growth was mainly driven by stronger manufacturing (+4.8% YoY; Oct: +4.2% YoY) and electricity production (+1.2% YoY; Oct: -1.0% YoY), offsetting the moderation in mining production (+6.1% YoY; Oct: +8.6% YoY).

DATA HIGHLIGHTS  

IPI growth picked up to +4.8% YoY in Nov (Oct: +4.6% YoY), surpassing consensus expectations of +2.9% YoY. Growth was mainly driven by stronger manufacturing production (+4.8% YoY; Oct: +4.2% YoY), followed by an upturn in electricity production (+1.2% YoY; Oct: -1.0% YoY). Meanwhile, mining production (+6.1% YoY; Oct: +8.6% YoY) recorded a moderation (refer to Figure #1).  

On a monthly seasonally adjusted basis, IPI posted a rebound (+2.7%; Oct: -3.7%), following an upturn in both manufacturing (+3.4%; Oct: -3.1%) and electricity production (+1.0%; Oct: -0.1%), offsetting the continued decline in mining (-2.1%; Oct: -6.0%) production.  

The manufacturing index gathered momentum (+4.8% YoY; Oct: +4.2% YoY), propped up by stronger growth in the domestic-oriented sector, despite the slight moderation in the export-oriented sector. The softer growth in the export-oriented sector (+5.3% YoY; Oct: +5.4% YoY) was attributed to a downturn in the production of ‘wood products, furniture, paper products & printing’ (-3.6% YoY; Oct: +0.3% YoY). Growth was also weighed down by slower production in ‘petroleum, chemical, rubber & plastic products’ (+0.4% YoY; Oct: +3.2% YoY). These offset the stronger growth recorded for E&E products (+12.1% YoY; Oct: +8.7% YoY), as well as the rebound posted in ‘textiles, wearing apparel, leather products & footwear’ (+0.8% YoY; Oct: -1.8% YoY).  

Meanwhile, growth in the domestic-oriented sector picked up pace (+3.8% YoY; Oct: +1.7% YoY), underpinned by an upturn in ‘transport equipment & other manufactures’ (+6.5% YoY; Oct: -0.4% YoY) on the back of a rebound in motor vehicle production (+9.4% YoY; Oct: -5.7% YoY). In line with the nation’s growing social activities, stronger growth was also seen in ‘food, beverages & tobacco’ (+4.8% YoY; Oct: +1.7% YoY) production. Meanwhile, softer growth was recorded for the production of ‘non-metallic mineral products, basic & fabricated metal products’ (+1.1% YoY; Oct: +3.0% YoY).  

Mining production continued to ease (+6.1% YoY; Oct: +8.6% YoY), on account of the slower production across both crude petroleum (+3.1% YoY; Oct: +4.8% YoY) and natural gas (+8.2% YoY; Oct: +11.4% YoY). On a monthly basis, production in crude petroleum slowed pace (+1.9%; Oct: +2.2%), while natural gas accelerated (+4.6%; Oct: +1.5%).

HLIB’s VIEW

The global outlook continued to darken in Dec following a further decline in global manufacturing PMI to 48.6 (Nov: 48.8), driven mainly by an accelerating rate of decline in order books. However, the reopening of China’s economy, along with its anticipated revival of demand, may partly cushion the impact of the external economic slowdown, particularly on nations with diversified export structures such as Malaysia. We continue to expect BNM to increase the OPR by 25bps in the coming Jan meeting.

Source: Hong Leong Investment Bank Research - 12 Jan 2023