Slowdown Was Reflected in Both Manufacturing and Mining Production

Growth in Malaysia’s industrial production index (IPI) slowed to 2.5% yoy in November (4.3% in October), but slightly higher than market expectations of 2.3%. The slowdown was reflected in mining sector, which fell into a contraction of -0.7% yoy in November, following a positive growth of 1.4% in October. Growth in the manufacturing sector, which accounts for 68.3% of the IPI basket, slowed from 5.4% yoy in October to 3.6% in November. However, in contrast, growth in the electricity sector rose by 3.2% yoy in November (2.8% in October).

Subdued Manufacturing Activity Seen in Most Major Clusters

Growth in manufacturing production was weighed down by weaker growth of both export- and domestic- oriented industries during the month. In the export-oriented industries, output of electrical & electronic products, which accounts for 18.2% of the total IPI, slowed to 5.3% yoy in November from 7.1% in October. Lower output of E&E products was due to weaker production of its sub-components, such as computer, electronics and optical products (5.8% yoy), electrical equipment (2.5%), as well as machinery and equipment (3.9%). This was in line with weaker exports of E&E, which had declined for the first time since March 2018 by 1.7% yoy in November (+23.3% in October).

Other export-oriented industries, such as output of petroleum, chemical, rubber & plastic product,s also slowed to 3.4% yoy in November, from 4.1% in October, led by lower output of chemicals and chemical products (0.4%), basic pharmaceutical products & pharmaceutical preparations (2.9%) and rubber and plastic products (3.7%). Similarly, output of wood products, furniture, paper products, and printing also slowed from 6.5% yoy in October to 2.8% in November, dragged by lower production of wood & products of wood & cork (3.7%), paper and paper products (0.3%) and furniture (2.1%). In contrast, output in textiles, wearing apparel, leather products & footwear expanded to a five-month high of 4.8% yoy in November from 2.2% in October, supported by higher production of textiles (2.3%) and wearing apparel (7.9%). As for domestic-oriented industries, production of food, beverages and tobacco returned to the negative territory, declining by 2.6% yoy in November, from a growth of 2.6% in October. Output of growth in non-metallic mineral products, basic metal & fabricated metal products slowed to 4.1% yoy in November from 4.6% in October.

Source: Affin Hwang Research - 14 Jan 2019