Growth Supported by Higher Output in the Manufacturing Sector

Malaysia’s industrial production index (IPI) rose from 3.4% yoy in October to 5.0% in November, slightly better than market expectations of 4.6%. Higher growth in IPI was driven mainly by manufacturing sector, which increased by 6.7% yoy in November (4.2% yoy in October), due to higher output of electrical and electronic (E&E) products.

However, growth in mining sector slowed further in November, from 0.8% yoy in October to 0.2% in November. This was attributed to a flat growth in output of natural gas during the month (1.4% yoy in October), which offset higher output of crude petroleum (0.4% vs 0.3% yoy in October). Despite higher manufacturing output, production of electricity slowed from 4.6% yoy in October to 3.9% in November, signalling some slowdown in residential electricity consumption.

Higher Production of E&E Products in Tandem With Exports Demand

The improvement in manufacturing output was due to higher output of E&E products, which increased from 5.9% yoy in October to 6.9% in November. In particular, production of computer, electronics & optical rose by 7.5% yoy in November (6.2% in October), while output of electrical equipment and machinery equipment slowed slightly during the month to 3.1% and 3.6% growth respectively in November. Higher output of E&E products in November was in line with higher demand of E&E from overseas, where the country’s exports of E&E products rose sharply from 16.9% yoy in October to 21% in November.

Output of petroleum, chemical, rubber and plastic products also increased by 7.5% yoy in November, after slowing down to 2.1% in October. This was led by coke & refined petroleum products (9.4%), followed by chemicals and chemical products (7.5%), as well as basic pharmaceutical products & pharmaceutical preparations (11.5%). However, rubber and plastic products eased slightly in the month of November (2.9% vs 5.6% yoy in October).

The consumer-related cluster in manufacturing output remained supportive in November. By component, output of food, beverages & tobacco grew by 8.2% yoy in November (7.0% in October), attributed to higher production in food products (8.2%), as well as tobacco products (11.3%).

Source: Affin Hwang Research - 12 Jan 2018