Output in the Mining Sector Contracted for the First Time Since May

Malaysia’s industrial production index (IPI) slowed from 5.0% yoy in November to 2.9% in December, below market expectations of 4.6%. This was reflected mainly in the decline in mining output, from 0.2% yoy in November to -4.1% in December (dragged down by lower production in both crude petroleum and natural gas), while manufacturing output slowed from 6.7% yoy to 5.3% during the same period. However, despite a slower manufacturing sector, growth in electricity production remained steady at 3.9%, partly reflecting the country’s healthy domestic demand. On a monthly comparison, the IPI rose from a decline of 1.4% in November to 2.2% in December, supported by the turnaround in the manufacturing and electricity output.

Output of E&E Products Slowed to 4.1% Yoy in December

Slower growth in the manufacturing output was reflected in lower production of electrical and electronic (E&E) products, which eased from 6.9% yoy in November to 4.1% in December. This was due to lower output of computer, electronics & optical products (4.5% yoy in December vs 7.5% in November), electrical equipment (1.1% yoy vs. 3.1% in November) as well as machinery & equipment products (2.9% yoy vs. 3.6% in November). Lower production of E&E products was also in line with the softer exports of E&E products during the the same month, where the growth slowed sharply from 21.2% yoy in November to 6.2% yoy in December, the first single-digit growth in six months, attributed from slower demand from US, EU and Asean region.

Likewise, output of petroleum, chemical, rubber and plastic products also trended lower, slowing from 7.5% yoy in November to 3.6% in December. This was led by coke & refined petroleum products and decline in contraction in basic pharmaceutical products & pharmaceutical preparations. Nonetheless, output of rubber and plastic products increased by 3.8% yoy in December (2.9% in November). The consumer-related cluster in the manufacturing sector continued to improve further, as reflected in output of food, beverages & tobacco, which grew significantly by 17% yoy in December (8.2% in November), on the back of sustained growth in private consumption.

However, output of transport equipment and other manufacturers slowed by 5.4% yoy in December, after rising to 6.9% in November. On the construction-related cluster, output of non-metallic mineral products expanded further by 5.4%, while output of basic metal as well as fabricated metals rose by 4% and 4.8% respectively, signalling healthy growth in the construction sector, supported by on-going infrastructure projects in the country.

Source: Affin Hwang Research - 12 Feb 2018