Growth in IPI supported by higher output in mining sector

Growth in Malaysia’s industrial production index (IPI) hit 4.0% yoy in May, the same rate of increase as in the previous month and higher than market expectations of 3.5%. The IPI growth in May was reflected in higher production of the mining sector, which expanded by 3.0% yoy in May, following a 2.3% rise in April. Growth in manufacturing output remained stable at 4.2% yoy, slightly lower as compared to April’s 4.3%. Likewise, growth in electricity output slowed slightly from 5.8% yoy in May to 5.7% in April.

The expansion of mining production was underpinned by higher output of natural gas, as it surged by 7.6% yoy in May (6.1% in April), which provided some support from the continuing decline in output of crude petroleum (-2.0% yoy in May from -1.9% in April).

Slower production of E&E products in May

The slightly lower growth in manufacturing production in May was reflected in both the export and domestic oriented industries. Export-oriented industries, which contributed around 44.7% of the total weightage in industrial production, recorded slower output in May; production of electrical and electronics (E&E) products slowed to 3.7% yoy from 4.1% in April, with a noticeable 1.7% yoy slowdown in electrical equipment production after a 4.2% yoy rise in April. Besides that, output of petroleum, chemical, rubber and plastic products slowed from 3.6% yoy in May to 3.2% in April.

Nevertheless, the output of textiles, wearing apparel, leather products and footwear improved marginally to 5.8% yoy in May (5.7% in April). Meanwhile, production of wood products, furniture, paper products and printing rose steadily to 6.5% yoy in May, from 5.2% in April. As for the domestic oriented industries, output of non-metallic mineral products and basic metal & fabricated metal products slowed to 3.8% yoy in May from 4.0% in April. A slower pace of growth was also posted by transport equipment and other manufacturers, which slowed to 6.9% yoy in May following a 7.2% increase in April. On the flip side, output of food, beverages and tobacco registered a higher growth of 4.7% yoy in May (4.2% in April), as reflected by an expansion in the output of food products (4.8% in May vs. 4.1% in April) and beverages (3.5% in May vs. 3.0% in April).

Source: Affin Hwang Research - 15 Jul 2019