Slowdown Attributed Mainly to the Sharp Decline in Mining Output

Malaysia’s industrial production index (IPI) slowed to 1.2% yoy in July from 3.9% in June, sharply lower than market expectations of 3.1%. The slower growth in IPI was due mainly to the sharp decline in mining output, from 4.6% yoy in June to -8.4% in July, ending three consecutive months of positive increases. This was led by the declines in output of crude oil and condensate. However, growth in manufacturing output was sustained at 4% yoy in July (3.8% in June), while electricity output also increased by 2% yoy in July (1.7% in June). On a cumulative basis, growth in total IPI expanded by an average of 3.0% yoy in January-July 2019, as compared to 3.2% in the corresponding period of last year, with growth in manufacturing output expanding by 4.0% yoy in Jan-Jul 2019, albeit slowed than the 5% in JanJul 2018.

Stronger Growth in Output of Most Export-oriented Industries in July

Higher growth in manufacturing production was reflected in higher output of most export-oriented industries. In particular, production of electrical & electronic (E&E) products rose by 4.9% yoy in July from 3.5% in June, which was in line with the turnaround in exports of E&E products, which rose by 4.5% yoy in July after declining sharply by 6% in June.

Output of petroleum, chemical, rubber and plastic products industries was also higher by 3.4% yoy in July compared to 3% in June, led by higher production of coke & refined petroleum products, basic pharmaceutical products as well as rubber and plastic products. Production of wood products, furniture, paper products and printing increased by 5.6% yoy in July, rebounding from its seven-month low of 4.7% in June, supported by higher output of all its subcomponents. Similarly, output of textile, wearing apparel, leather products and footwear industries rose by 5.8% yoy in July (5.5% in June) supported by higher output of textiles and wearing apparel.

In the domestic-oriented industries, output of food, beverages and tobacco industries slowed for the second consecutive month to a seven-month low of 0.7% yoy in July from 3.9% in June. Meanwhile, output of non-metallic mineral products and basic metal & fabricated metal products slowed by 4.4% yoy in July from 4.8% in June. In contrast, production of transport equipment and other manufactures increased to 5.8% yoy in July from 5.6% in June.

Source: Affin Hwang Research - 12 Sept 2019