Growth Supported by Steady Output in Manufacturing Sector

Malaysia’s industrial production index (IPI) rose by 3.1% yoy in March, higher than the 1.7% registered in February. This was also above market expectations of 2.3%, as growth in manufacturing output improved by 4.1% yoy in March (3.7% in February). Growth in mining output fell by 0.2% yoy in March, albeit a smaller decline compared with -5.0% in February. Meanwhile, growth in electricity output remained stable, expanding by 4.8% yoy in March, from 4.9% in February

Growth in the manufacturing production, which accounted for 68.3% of the IPI basket, was supported by higher production in export-oriented industries. In particular, higher output was reflected in the petroleum, chemical, rubber and plastic products industries, which expanded by 3.7% yoy in March, more than double the 1.6% in February, due to the steady production of the majority of the sub-components, such as coke and refined petroleum products, chemicals and chemical products as well as basic pharmaceuticals products and pharmaceutical preparations. Moreover, output of textile, wearing apparel, leather products and footwear industries improved to 4.9% yoy in March, following a 3.6% rise in February.

Nonetheless, growth in the output of electrical & electronic (E&E) products slowed for the third consecutive month to 2.7% yoy in March, from 3.1% in February. Slower growth of E&E output was reflected in the production of its sub-components, including electrical equipment and machinery and equipment. This was also in tandem with the subdued export growth of E&E products, which dropped by 1.9% yoy in March after 4.9% growth in February. Besides that, production growth of wood products, furniture, paper products and printing also slowed to 5.0% yoy in March (5.5% in February), dragged by lower output of wood and products of wood and cork and printing and reproduction of recorded media. In the domestic-oriented industry, output of food, beverages and tobacco industries continued to post a positive growth in March, increasing by 6.8% yoy (6.3% in February). At the same time, output of non-metallic mineral products and basic metal & fabricated metal products also expanded by 3.5% yoy in March, albeit at a slower rate of 4.6% in February.

Source: Affin Hwang Research - 13 May 2019